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þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
New York, New York 10016
(Address of principal executive offices)
Telephone:(212) 697-1105
Title of each class | Name of each exchange on which registered | |
Common stock, $.01 par value | NASDAQ |
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Part and Item Number of | ||
Document | Form 10-K into which incorporated | |
Loral Notice of Annual Meeting of Stockholders and Proxy Statement for the Annual Meeting of Stockholders to be held May 19, 2009 | Part II, Item 5(d) Part III, Items 11 through 14 |
INDEX TO ANNUAL REPORT ONFORM 10-K
For the Year Ended December 31, 2008
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Item 1. | Business |
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Year ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Total segment revenues | $ | 881 | $ | 814 | $ | 697 | ||||||
Eliminations | (12 | ) | (53 | ) | (60 | ) | ||||||
Revenues from satellite manufacturing as reported | $ | 869 | $ | 761 | $ | 637 | ||||||
Segment Adjusted EBITDA before eliminations(1) | $ | 45 | $ | 35 | $ | 66 | ||||||
(1) | See Consolidated Operating Results in Management’s Discussion and Analysis of Financial Condition and Results of Operations for significant items that affect comparability between the periods presented (see Note 15 to the Loral consolidated financial statements for the definition of Adjusted EBITDA). |
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Expected | ||||||||||||||||||||||||
Orbital Location | Manufacturer’s | End-of- | ||||||||||||||||||||||
Regions | Launch | End-of-Service- | Commercial- | Transponders(1) | ||||||||||||||||||||
Covered | Date | Life | Service Life(1) | C-band(2) | Ku-band(2) | Ka-band | L-band(3) | Model | ||||||||||||||||
Nimiq 1 | 91.0 °WL Canada, | May 1999 | 2011 | 2024 | — | 32@24MHz | — | — | A2100 AX | |||||||||||||||
Continental United | (Lockheed Martin) | |||||||||||||||||||||||
States | ||||||||||||||||||||||||
Nimiq 2(4) | 91.0°WL Canada, | December 2002 | 2015 | 2023 | — | 20@24MHz | 2@500/100MHz | — | A2100 AX | |||||||||||||||
Continental United | (Lockheed Martin) | |||||||||||||||||||||||
States | ||||||||||||||||||||||||
Nimiq 3(5) | 82 °WL Canada | June 1995 | 2007 | 2009 | — | 16@24MHz | — | — | BSS 601 | |||||||||||||||
Continental United | (Boeing) | |||||||||||||||||||||||
States | ||||||||||||||||||||||||
Nimiq 4 | 82 ° WL Canada | September 2008 | 2023 | 2027 | 32@24 MHz | 8@54 MHz | E3000 (EADS Astrium) | |||||||||||||||||
Anik F1(6) | 107.3 °WL Canada, | November 2000 | 2016 | 2013 | 12@36MHz | 16@27MHz | — | — | BSS702 (Boeing) | |||||||||||||||
Continental United | (S. America) | (S. America) | ||||||||||||||||||||||
States, South America | ||||||||||||||||||||||||
Anik F2 | 111.1 ° WL Canada, | July 2004 | 2019 | 2028 | 24@36MHz | 32@27MHz | 31@56/112 MHz | — | BSS702 | |||||||||||||||
Continental United | 6@500MHz | (Boeing) | ||||||||||||||||||||||
States | 1@56/112MHz | |||||||||||||||||||||||
Anik F1-R(3) | 107.3 ° WL North America | September 2005 | 2020 | 2023 | 24@36MHz | 32@27MHz | — | 2@20MHz | E3000 (EADS Astrium) | |||||||||||||||
Anik F3(7) | 118.7 °WL Canada, | April 2007 | 2022 | 2026 | 24@36MHz | 32@27MHz | 2@75MHz | — | E3000 | |||||||||||||||
Continental United | (500MHz) | (EADS Astrium) | ||||||||||||||||||||||
States | ||||||||||||||||||||||||
Telstar 10(8) | 76.5°EL Asia and | October 1997 | 2009 | 2012 | 1@30MHz | 7@54MHz | — | — | SS/L 1300 | |||||||||||||||
Portions of Europe, | 26@36MHz | |||||||||||||||||||||||
Africa and Australia | ||||||||||||||||||||||||
Telstar 12(9) | 15 °WL Eastern United | October 1999 | 2012 | 2016 | — | 37@54MHz | — | — | SS/L 1300 | |||||||||||||||
States, SE Canada, | ||||||||||||||||||||||||
Europe, Russia, Middle | ||||||||||||||||||||||||
East, North Africa, | ||||||||||||||||||||||||
portions of South and | ||||||||||||||||||||||||
Central America | ||||||||||||||||||||||||
Telstar 14/Estrela | 63 °WL Brazil And | January 2004 | 2019 | 2011 | — | 9@72MHz | — | — | SS/L 1300 | |||||||||||||||
do Sul(10) | portions of Latin | 10@36MHz | ||||||||||||||||||||||
America, North | 2@28MHz | |||||||||||||||||||||||
America, Atlantic | 1@56MHz | |||||||||||||||||||||||
Ocean | ||||||||||||||||||||||||
Telstar 18(11)(12) | 138 ° EL India, South | June 2004 | 2017 | 2018 | 16@36MHz | 5@54MHz | — | — | SS/L 1300 | |||||||||||||||
East Asia, China, | 1@54MHz | 1@40MHz | ||||||||||||||||||||||
Australia And Hawaii |
(1) | The number of available transponders and expected or nominal end of life shown in this table reflect Telesat Canada’s current estimate of each satellite’s capacity and useful life, taking account of anomalies and malfunctions the satellites have experienced and other factors such as remaining fuel levels and consumption rates and other available engineering data. Telesat Canada periodically reviews and updates these estimates based on a satellite’s performance. Accordingly, these estimates are subject to change and it is possible that the actual commercial life of any of these satellites will be shorter than we currently anticipate. See Item 1A — “Risk Factors — After launch, satellites remain vulnerable to in-orbit failures which may result in reduced revenues and profits and other financial consequences.” | |
(2) | Includes extended C-band and extended Ku-band in certain cases. | |
(3) | Telesat Canada has contracted the L-band capacity on Anik F1-R to Lockheed Martin for 10 years. This L-band spectrum is not Telesat Canada’s; it is a United States spectrum licensed to Lockheed Martin. |
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(4) | Due to malfunctions affecting available power on Nimiq 2, not all transponders carried on the satellite are operational. | |
(5) | Nimiq 3 is leased from DIRECTV, but is in a Telesat Canada orbital position. DIRECTV can terminate its lease agreement if it experiences two or more catastrophic failures with its other satellites. In the event of such termination, Telesat Canada may lose the revenues associated with this satellite if it cannot redeploy that capacity to other satellites. This spacecraft will be decommissioned in the second quarter of 2009. | |
(6) | Due to a gradual decrease in power on Anik Fl, transponders providing North American coverage have been turned off, and this satellite will experience a prematureend-of-life estimated to be 2013. | |
(7) | Telesat Canada has leased, through the satellite’s end-of-life, all of the Ku-band capacity of Anik F3 to EchoStar. | |
(8) | Telstar 10 does not include one transponder @ 36MHz and eight transponders @ 54MHz which have been turned off for satellite power management, and does not include one transponder @ 36MHz owned by APT. | |
(9) | Telstar 12 has38-54MHz transponders. Four of these transponders were given to Eutelsat to settle coordination issues, and Telesat Canada leases back three of these transponders. | |
(10) | Telstar 14 has substantially reduced transponder capacity and a limited expected life due to the failure of a solar array to fully deploy upon launch. | |
(11) | Includes 16.6MHz of C-band capacity provided to the Government of Tonga in lieu of a cash payment for the use of the orbital location. | |
(12) | Telesat Canada has agreed to purchase two additional transponders from APT in 2009. |
• | Satmex 5: 3-36MHz Ku transponders; | |
• | Satmex 6: 2-36MHz C-band transponders; 2-36MHz Ku transponders; and | |
• | Agila (Mabuhay): 3-36MHz C-band transponders |
Nimiq 5 | Telstar 11N | |||
Orbital Location | 72.7o WL | 37.55o WL | ||
Regions Covered | Canada, Continental United States | North and Central America, Europe, Africa and the maritime Atlantic Ocean region | ||
Planned In-Service Date | 2009 | 2009(1) | ||
Manufacturer’s End-of- Service-Life | 15 Years | 15 Years | ||
Customer Committed Capacity | 15 Years/Fixed | |||
Transponders: | ||||
Ku-band | 32@24MHz | 39@54MHz | ||
Model | SS/L 1300 | SS/L 1300 |
(1) | Telstar 11N was launched on February 26, 2009, is currently undergoing in-orbit testing and is expected to enter commercial service in the second quarter of 2009. |
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Year ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Revenue: | ||||||||||||
Total segment revenues | $ | 685 | $ | 241 | $ | 164 | ||||||
Eliminations | — | (2 | ) | (3 | ) | |||||||
Affiliate eliminations(2) | (685 | ) | (118 | ) | — | |||||||
Revenues from satellite services as reported | $ | — | $ | 121 | $ | 161 | ||||||
Adjusted EBITDA: | ||||||||||||
Total segment Adjusted EBITDA | $ | 436 | $ | 118 | $ | 68 | ||||||
Eliminations | — | (2 | ) | (3 | ) | |||||||
Affiliate eliminations(2) | (427 | ) | (65 | ) | — | |||||||
Adjusted EBITDA from satellite services after eliminations(3) | $ | 9 | $ | 51 | $ | 65 | ||||||
(1) | Satellite Services segment’s performance includes Loral Skynet through October 30, 2007 and Telesat Canada for the period from October 31, 2007 to December 31, 2007. | |
(2) | Affiliate eliminations represent the elimination of amounts attributable to Telesat Canada. | |
(3) | See Consolidated Operating Results in Management’s Discussion and Analysis of Financial Condition and Results of Operations for significant items that affect comparability between the periods presented (see Note 15 to the consolidated financial statements for the definition of Adjusted EBITDA). |
Telesat Canada | ||||||||
For the Period from | ||||||||
January 1, | For The Year | |||||||
2007 to | Ended | |||||||
October 30, | December 31, | |||||||
2007 | 2006 | |||||||
Total operating revenues | CAD 457.8 | CAD 479.0 | ||||||
Adjusted EBITDA | CAD 263.2 | CAD 261.0 |
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Item 1A. | Risk Factors |
I. | Financial and Telesat Canada Investment Risk Factors |
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II. | Segment Risk Factors |
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Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
Item 3. | Legal Proceedings |
Item 4. | Submission of Matters to a Vote of Security Holders |
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Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
(a) | Market Price and Dividend Information |
High | Low | |||||||
Year ended December 31, 2008 | ||||||||
Quarter ended December 31, 2008 | $ | 15.86 | $ | 6.04 | ||||
Quarter ended September 30, 2008 | 18.81 | 13.29 | ||||||
Quarter ended June 30, 2008 | 25.42 | 15.02 | ||||||
Quarter ended March 31, 2008 | 34.20 | 21.78 | ||||||
Year ended December 31, 2007 | ||||||||
Quarter ended December 31, 2007 | $ | 45.27 | $ | 31.67 | ||||
Quarter ended September 30, 2007 | 50.42 | 34.83 | ||||||
Quarter ended June 30, 2007 | 51.82 | 44.50 | ||||||
Quarter ended March 31, 2007 | 53.10 | 39.00 |
(b) | Approximate Number of Holders of Common Stock |
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(c) | Dividends |
(d) | Securities Authorized for Issuance under Equity Compensation Plans |
(e) | Comparison of Cumulative Total Returns |
Item 6. | Selected Financial Data |
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(In thousands, except per share data)
Successor Registrant | Predecessor Registrant | ||||||||||||||||||||||||
For the Period | For the Period | ||||||||||||||||||||||||
October 2, | January 1, | ||||||||||||||||||||||||
2005 to | 2005 to | Year Ended | |||||||||||||||||||||||
Year Ended December 31, | December 31, | October 1, | December 31, | ||||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2005 | 2004 | ||||||||||||||||||||
Statement of operations data: | |||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||
Satellite Manufacturing | $ | 869,398 | $ | 761,363 | $ | 636,632 | $ | 161,069 | $ | 318,587 | $ | 299,608 | |||||||||||||
Satellite Services | — | 121,091 | 160,701 | 36,096 | 110,596 | 222,519 | (1) | ||||||||||||||||||
Total Revenues | 869,398 | 882,454 | 797,333 | 197,165 | 429,183 | 522,127 | |||||||||||||||||||
Operating (loss) income from continuing operations(2) | (193,977 | ) | 45,256 | 29,818 | (4,945 | ) | (67,095 | ) | (214,345 | ) | |||||||||||||||
Gain on discharge of pre-petition obligations and fresh-start adjustments | — | — | — | — | 1,101,453 | (3) | — | ||||||||||||||||||
(Loss) income from continuing operations before income taxes, equity in net losses of affiliates and minority interest(4)(5) | (151,523 | ) | 157,786 | 30,117 | (5,395 | ) | 1,022,651 | (207,852 | ) | ||||||||||||||||
Income tax (provision) benefit | (45,744 | ) | (83,457 | ) | (20,880 | ) | (1,752 | ) | 10,901 | (13,284 | )(6) | ||||||||||||||
(Loss) income from continuing operations before equity in net losses of affiliates and minority interest | (197,267 | ) | 74,329 | 9,237 | (7,147 | ) | 1,033,552 | (221,136 | ) | ||||||||||||||||
Equity in net (losses) income of affiliates(7) | (495,649 | ) | (21,430 | ) | (7,163 | ) | (5,447 | ) | (2,796 | ) | 46,654 | ||||||||||||||
Minority interest | — | (23,240 | ) | (24,794 | ) | (2,667 | ) | 126 | 135 | ||||||||||||||||
(Loss) income from continuing operations | (692,916 | ) | 29,659 | (22,720 | ) | (15,261 | ) | 1,030,882 | (174,347 | ) | |||||||||||||||
Loss from discontinued operations, net of taxes | — | — | — | — | — | (2,348 | ) | ||||||||||||||||||
Gain on sale of discontinued operations, net of taxes | — | — | — | — | 13,967 | — | |||||||||||||||||||
Net (loss) income | (692,916 | ) | 29,659 | (22,720 | ) | (15,261 | ) | 1,044,849 | (176,695 | ) | |||||||||||||||
Preferred dividends | (24,067 | ) | (19,379 | ) | — | — | — | — | |||||||||||||||||
Beneficial conversion feature related to the issuance of LoralSeries A-1 Preferred Stock(8) | — | (25,685 | ) | — | — | — | — | ||||||||||||||||||
Net (loss) income applicable to common shareholders | (716,983 | ) | (15,405 | ) | (22,720 | ) | (15,261 | ) | 1,044,849 | (176,695 | ) | ||||||||||||||
Basic and diluted (loss) earnings per share: | |||||||||||||||||||||||||
Continuing operations | $ | (35.13 | ) | $ | (0.77 | ) | $ | (1.14 | ) | $ | (0.76 | ) | $ | 23.37 | $ | (3.96 | ) | ||||||||
Discontinued operations | — | — | — | — | 0.32 | (0.05 | ) | ||||||||||||||||||
(Loss) earnings per share | $ | (35.13 | ) | $ | (0.77 | ) | $ | (1.14 | ) | $ | (0.76 | ) | $ | 23.69 | $ | (4.01 | ) | ||||||||
Cash flow data: | |||||||||||||||||||||||||
(Used in) provided by operating activities(9) | (202,210 | ) | 27,123 | 88,002 | (38,531 | ) | (143,827 | ) | 66,129 | ||||||||||||||||
(Used in) provided by investing activities(10) | (47,308 | ) | 61,519 | (175,978 | ) | (5,089 | ) | 194,707 | 906,887 | ||||||||||||||||
Provided by (used in) financing activities | 52,372 | 39,510 | (1,278 | ) | 120,763 | — | (966,887 | ) |
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Predecessor | ||||||||||||||||||||
Successor Registrant | Registrant | |||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Balance sheet data: | ||||||||||||||||||||
Cash and cash equivalents | $ | 117,548 | $ | 314,694 | $ | 186,542 | $ | 275,796 | $ | 147,773 | ||||||||||
Short-term investments | — | — | 106,588 | — | — | |||||||||||||||
Total assets | 995,867 | 1,702,939 | 1,729,911 | 1,678,977 | 1,218,733 | |||||||||||||||
Debt, including current portion | 55,000 | — | 128,084 | 128,191 | — | |||||||||||||||
Non-current liabilities and minority interest | 381,836 | 289,602 | 535,271 | 603,374 | 84,677 | |||||||||||||||
Liabilities subject to compromise(11) | — | — | — | — | 1,916,000 | |||||||||||||||
Shareholders’ equity (deficit) | 209,657 | 973,558 | 647,002 | 627,164 | (1,044,101 | ) |
(1) | Satellite Services revenues for 2004 include $87.2 million relating to a sales-type lease. | |
(2) | During 2008, we recorded a goodwill impairment charge of $187.9 million. In connection with the Telesat Canada transaction, which closed on October 31, 2007, we recognized a gain of $104.9 million in 2007 on the contribution of substantially all of the assets and related liabilities of Loral Skynet to Telesat Canada. See Note 6 to the Loral consolidated financial statements. | |
(3) | In connection with our emergence from Chapter 11 and our adoption of fresh-start accounting on October 1, 2005, we recognized a gain on discharge of pre-petition obligations and fresh-start adjustments of $1.101 billion, related interest expense of $13.2 million related to the holders of claims to be paid in cash and a tax benefit of $15.4 million, each of which is reflected separately in our statement of operations. | |
(4) | In connection with the Telesat Canada transaction during 2007, we recognized a gain on foreign exchange contracts of $89.4 million (see Note 13 to the Loral consolidated financial statements). | |
(5) | During 2008, we recorded income of $58.3 million related to a gain on litigation recovery from Rainbow DBS and a loss of $19.5 million related to the award of attorneys’ fees and expenses to the plaintiffs for shareholder litigation concluded during 2008. | |
(6) | 2004 includes an $11 million increase to the deferred tax valuation allowance relating to the reversal of deferred tax liabilities arising from the write-off of our investment in Globalstar, L.P.’s $500 million credit facility, upon Globalstar, L.P.’s dissolution in June 2004. | |
(7) | Beginning October 31, 2007, our principal affiliate is Telesat Canada. Loral also has investments in XTAR and joint ventures providing Globalstar service, which are accounted for under the equity method. On December 21, 2007 Loral agreed to sell its interest in Globalstar do Brazil S.A. which resulted in Loral recording a charge of $11.3 million in 2007 (see Note 6 to the Loral consolidated financial statements). During 2004, we recorded $47 million of equity income on the reversal of vendor financing liabilities that were non-recourse to SS/L in the event of non-payment by Globalstar, L.P. | |
(8) | As of December 23, 2008, in accordance with a court ordered restated certificate of incorporation, the previously issued Loral Series-1 Preferred stock was cancelled. As the fair value of Loral’s common stock from January 1, to December 23, 2008 was less than the conversion price ($30.1504), we did not record any beneficial conversion feature during 2008 (see Note 10 to the Loral consolidated financial statements). | |
(9) | Cash flow (used in) provided by operating activities includes cash flow from operating activities provided by discontinued operations in 2004. | |
(10) | Cash flow (used in) provided by investing activities includes cash flow provided by (used in) investing activities of discontinued operations for the period January 1, 2005 to October 1, 2005 and 2004. | |
(11) | As a result of our Chapter 11 filing, Old Loral’s debt obligations, preferred stock obligations and certain other liabilities existing at July 15, 2003, the date Old Loral and certain of its subsidiaries filed voluntary petition for reorganization, were classified as liabilities subject to compromise on our balance sheets at December 31, 2004. These obligations were extinguished as of the Effective Date. |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Satellite Manufacturing | $ | 881.4 | $ | 814.3 | $ | 696.5 | ||||||
Satellite Services | 685.2 | 241.2 | 163.8 | |||||||||
Segment revenues | 1,566.6 | 1,055.5 | 860.3 | |||||||||
Eliminations(1) | (12.0 | ) | (55.2 | ) | (63.0 | ) | ||||||
Affiliate eliminations(2) | (685.2 | ) | (117.8 | ) | — | |||||||
Revenues as reported(3) | $ | 869.4 | $ | 882.5 | $ | 797.3 | ||||||
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Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Satellite Manufacturing | $ | 45.1 | $ | 34.5 | $ | 65.9 | ||||||
Satellite Services | 436.5 | 118.4 | 68.0 | |||||||||
Corporate expenses(4) | (14.9 | ) | (37.9 | ) | (26.8 | ) | ||||||
Segment Adjusted EBITDA before eliminations | 466.7 | 115.0 | 107.1 | |||||||||
Eliminations(1) | (1.6 | ) | (6.1 | ) | (6.0 | ) | ||||||
Affiliate eliminations(2) | (427.2 | ) | (65.3 | ) | — | |||||||
Adjusted EBITDA | $ | 37.9 | $ | 43.6 | $ | 101.1 | ||||||
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Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Adjusted EBITDA | $ | 37.9 | $ | 43.6 | $ | 101.1 | ||||||
Depreciation, amortization and stock-based compensation(5) | (44.0 | ) | (103.3 | ) | (71.3 | ) | ||||||
Impairment of goodwill(6) | (187.9 | ) | — | — | ||||||||
Gain on contribution of Loral Skynet(7) | — | 104.9 | — | |||||||||
Operating (loss) income | (194.0 | ) | 45.2 | 29.8 | ||||||||
Interest and investment income | 11.9 | 39.3 | 31.5 | |||||||||
Interest expense(8) | (2.3 | ) | (2.3 | ) | (23.4 | ) | ||||||
Gain (loss) on foreign exchange contracts | — | 89.4 | (5.8 | ) | ||||||||
Gain on litigation, net | 38.8 | — | — | |||||||||
Impairment of available for sale securities | (5.8 | ) | — | — | ||||||||
Loss on extinguishment of debt | — | (16.2 | ) | — | ||||||||
Other (expense) income | (0.1 | ) | 2.4 | (2.0 | ) | |||||||
Income tax provision | (45.7 | ) | (83.5 | ) | (20.8 | ) | ||||||
Equity in net losses of affiliates | (495.7 | ) | (21.4 | ) | (7.2 | ) | ||||||
Minority interest | — | (23.2 | ) | (24.8 | ) | |||||||
Net (loss) income | $ | (692.9 | ) | $ | 29.7 | $ | (22.7 | ) | ||||
(1) | Represents the elimination of intercompany sales and intercompany Adjusted EBITDA, primarily for satellites under construction by SS/L for Loral and its wholly owned subsidiaries and for Satellite Services leasing transponder capacity to SS/L. | |
(2) | Represents the elimination of amounts attributed to Telesat Canada whose results are reported in our consolidated statements of operations as equity in net losses of affiliates. | |
(3) | Includes revenues from affiliates of $84.0 million, $22.0 million and $11.3 million for the years ended December 31, 2008, 2007 and 2006, respectively. | |
(4) | Represents corporate expenses incurred in support of our operations and for the years ended December 31, 2008, 2007 and 2006 includes $0 million, $0.3 million and $1.2 million, respectively, of continuing expenses for bankruptcy related matters, which after the adoption of fresh-start accounting were classified as corporate general and administrative expenses. | |
(5) | Includes non-cash stock-based compensation of $6.2 million and $21.5 million for the years ended December 31, 2008 and 2007, respectively, as a result of shareholder approval of the Stock Incentive Plan amendment on May 22, 2007 (see Note 10 to the financial statements). | |
(6) | During the fourth quarter of 2008, we determined that the implied fair value of SS/L goodwill had dropped below its carrying value, and we recorded a charge to expense to reflect this impairment. | |
(7) | In connection with the Telesat Canada transaction, which closed on October 31, 2007, we recognized a gain on the contribution of substantially all of the assets and related liabilities of Loral Skynet to Telesat Canada (see Note 6 to the financial statements). | |
(8) | Interest expense for the year ended December 31, 2007 includes a reduction of $9 million resulting from the reduction of warranty liability. |
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% Increase | ||||||||||||||||||||
(Decrease) | ||||||||||||||||||||
Year Ended | 2008 | 2007 | ||||||||||||||||||
December 31, | vs. | vs. | ||||||||||||||||||
2008 | 2007 | 2006 | 2007 | 2006 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Revenues from Satellite Manufacturing | $ | 881 | $ | 814 | $ | 697 | 8 | % | 17 | % | ||||||||||
Eliminations | (12 | ) | (53 | ) | (60 | ) | (77 | )% | (12 | )% | ||||||||||
Revenues from Satellite Manufacturing as reported | $ | 869 | $ | 761 | $ | 637 | 14 | % | 20 | % | ||||||||||
% Increase | ||||||||||||||||
(Decrease) | ||||||||||||||||
Year Ended | 2007 | |||||||||||||||
December 31, | vs. | |||||||||||||||
2008 | 2007 | 2006 | 2006 | |||||||||||||
(in millions) | ||||||||||||||||
Revenues from Satellite Services before specific items | $ | — | $ | 126 | $ | 149 | (17 | )% | ||||||||
Customer termination payment | — | — | 15 | |||||||||||||
Cash basis customer payments | — | (3 | ) | — | ||||||||||||
Eliminations | — | (2 | ) | (3 | ) | (26 | )% | |||||||||
Revenues from Satellite Services as reported | $ | — | $ | 121 | $ | 161 | (25 | )% | ||||||||
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% Increase | ||||||||||||||||||||
(Decrease) | ||||||||||||||||||||
2008 | 2007 | |||||||||||||||||||
Year Ended December 31, | vs. | vs. | ||||||||||||||||||
2008 | 2007 | 2006 | 2007 | 2006 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Cost of Satellite Manufacturing includes: | ||||||||||||||||||||
Cost of Satellite Manufacturing before specific identified charges | $ | 747 | $ | 657 | $ | 537 | 14 | % | 23 | % | ||||||||||
Depreciation, amortization and stock-based compensation | 39 | 36 | 23 | 7 | % | 56 | % | |||||||||||||
Transponder rights provided to SS/L in the Satmex settlement agreement | — | — | (19 | ) | ||||||||||||||||
Accrued warranty obligations | 2 | (4 | ) | 8 | ||||||||||||||||
Provisions for inventory obsolescence | — | — | 2 | |||||||||||||||||
Cost of Satellite Manufacturing | $ | 788 | $ | 689 | $ | 551 | 14 | % | 25 | % | ||||||||||
Cost of Satellite Manufacturing as a% of Satellite Manufacturing revenues as reported | 91 | % | 90 | % | 87 | % |
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% Increase | ||||||||||||||||
(Decrease) | ||||||||||||||||
Year Ended | 2007 | |||||||||||||||
December 31, | vs. | |||||||||||||||
2008 | 2007 | 2006 | 2006 | |||||||||||||
(In millions) | ||||||||||||||||
Cost of Satellite Services includes: | ||||||||||||||||
Cost of Satellite Services before specific identified charges | $ | — | $ | 42 | $ | 53 | (21 | )% | ||||||||
Depreciation and amortization | — | 44 | 46 | (3 | )% | |||||||||||
Cost of Satellite Services | $ | — | $ | 86 | $ | 99 | (13 | )% | ||||||||
Cost of Satellite Services as a% of Satellite Services revenues as reported | 71 | % | 61 | % |
% Increase | ||||||||||||||||||||
(Decrease) | ||||||||||||||||||||
2008 | 2007 | |||||||||||||||||||
Year Ended December 31, | vs. | vs. | ||||||||||||||||||
2008 | 2007 | 2006 | 2007 | 2006 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Selling, general and administrative expenses includes: | ||||||||||||||||||||
Selling, general and administrative expenses before specific charges | $ | 87 | $ | 133 | $ | 118 | (35 | )% | 12 | % | ||||||||||
Litigation costs | 5 | 11 | 6 | (58 | )% | 90 | % | |||||||||||||
Stock based compensation | 5 | 23 | 2 | (77 | )% | |||||||||||||||
Continuing expenses for bankruptcy related matters | — | — | 1 | |||||||||||||||||
Selling, general and administrative expenses as reported | $ | 97 | $ | 167 | $ | 127 | (42 | )% | 31 | % | ||||||||||
% of revenues as reported | 11 | % | 19 | % | 16 | % |
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Consideration received for the contribution of Loral Skynet to Telesat Holdco: | ||||
Cash and marketable securities | $ | 61.5 | ||
Fair value of equity in Telesat Holdco | 670.5 | |||
Total consideration | 732.0 | |||
Book value of contributed net assets of Loral Skynet | 440.5 | |||
Consideration in excess of book value | $ | 291.5 | ||
Gain recognized | $ | 104.9 | ||
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Year Ended | ||||||||||||
December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Interest and investment income | $ | 12 | $ | 39 | $ | 32 |
Year Ended | ||||||||||||
December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Interest cost before capitalized interest | $ | 3 | $ | 12 | $ | 26 | ||||||
Capitalized interest | (1 | ) | (10 | ) | (3 | ) | ||||||
Interest expense | $ | 2 | $ | 2 | $ | 23 | ||||||
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Year Ended | ||||||||||||
December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Telesat Canada | $ | (479.6 | ) | $ | (1.8 | ) | $ | — | ||||
XTAR | (16.1 | ) | (10.6 | ) | (7.4 | ) | ||||||
Other | — | (9.0 | ) | 0.2 | ||||||||
$ | (495.7 | ) | $ | (21.4 | ) | $ | (7.2 | ) | ||||
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For the Period | ||||||||
October 31, | ||||||||
Year Ended | 2007 | |||||||
December 31, | to December 31, | |||||||
2008 | 2007 | |||||||
Statement of Operations Data: | ||||||||
Revenues | $ | 685.2 | $ | 117.8 | ||||
Operating expenses | (258.0 | ) | (52.5 | ) | ||||
Impairment of long-lived and intangible assets | (454.9 | ) | — | |||||
Depreciation, amortization and stock-based compensation | (226.0 | ) | (41.2 | ) | ||||
Operating income | (253.7 | ) | 24.1 | |||||
Interest expense | (231.1 | ) | (41.3 | ) | ||||
Other expense, net | (403.1 | ) | (45.6 | ) | ||||
Income tax benefit | 139.9 | 61.5 | ||||||
Net loss | (748.0 | ) | (1.3 | ) |
December 31, 2008 | December 31, 2007 | |||||||
Balance Sheet Data: | ||||||||
Current assets | $ | 179.8 | $ | 143.7 | ||||
Total assets | 4,273.2 | 5,610.0 | ||||||
Current liabilities | 171.4 | 229.5 | ||||||
Long-term debt, including current portion | 2,901.6 | 2,828.0 | ||||||
Total liabilities | 3,760.2 | 4,156.7 | ||||||
Redeemable preferred stock | 116.0 | 143.1 | ||||||
Shareholders’ equity | 397.0 | 1,310.2 |
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2008 | 2007 | |||||||
Satellite Manufacturing | $ | 1,381 | $ | 1,025 | ||||
Satellite Services | 4,207 | 5,251 | ||||||
Total backlog before eliminations | 5,588 | 6,276 | ||||||
Satellite Manufacturing eliminations | (25 | ) | — | |||||
Satellite Services eliminations | (4,207 | ) | (5,251 | ) | ||||
Total backlog | $ | 1,356 | $ | 1,025 | ||||
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Payments Due by Period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
Total | 1 Year | 1-3 Years | 4-5 Years | 5 Years | ||||||||||||||||
Operating leases(1) | $ | 38,011 | $ | 9,723 | $ | 15,295 | $ | 5,904 | $ | 7,089 | ||||||||||
Unconditional purchase obligations(2) | 507,862 | 356,992 | 150,870 | — | — | |||||||||||||||
Other long-term obligations(3) | 53,209 | 24,010 | 29,199 | — | — | |||||||||||||||
Revolving credit agreement(4) | 55,000 | — | 55,000 | — | — | |||||||||||||||
Total contractual cash obligations(5) | $ | 654,082 | $ | 390,725 | $ | 250,364 | $ | 5,904 | $ | 7,089 | ||||||||||
Total | Amount of Commitment Expiration Per Period | |||||||||||||||||||
Amounts | Less than | More than | ||||||||||||||||||
Committed | 1 Year | 1-3 Years | 4-5 Years | 5 Years | ||||||||||||||||
Stand by letter of credit | $ | 4,927 | $ | 4,927 | $ | — | $ | — | $ | — | ||||||||||
(1) | Represents future minimum payments under operating leases with initial or remaining terms of one year or more. | |
(2) | SS/L has entered into various purchase commitments with suppliers due to the long lead times required to produce purchased parts. | |
(3) | Represents our commitment in connection with an agreement entered into between Loral and ViaSat for the purchase by Loral of a portion of the ViaSat-1 satellite which is being constructed by SS/L for ViaSat (see Note 16 to the financial statements). | |
(4) | On October 16, 2008, SS/L entered into a Credit Agreement with several banks and other financial institutions. The Credit Agreement provides for a $100 million senior secured revolving credit facility. The Revolving Facility includes a $50 million letter of credit sublimit. The Credit Agreement is for a term of three years, maturing on October 16, 2011 (see Note 8 to the financial statements). Payment amounts shown exclude interest which is not expected to be significant. | |
(5) | Does not include our FIN 48 liabilities for uncertain tax positions of $109.0 million. Because the timing of future cash outflows associated with our FIN 48 liabilities for uncertain tax positions is highly uncertain, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities (see Note 9 to the financial statements). |
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Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Revenues | $ | 84.0 | $ | 22.0 | $ | 11.3 | ||||||
Elimination of Loral’s proportionate share of (profits) losses relating to affiliate transactions | (5.0 | ) | 1.9 | 0.4 | ||||||||
Profits (losses) relating to affiliate transactions not eliminated | 2.8 | (1.1 | ) | (0.3 | ) |
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
U.S. | ||||||||
Foreign Currency | $ | |||||||
Future revenues — Japanese Yen | ¥ | 64.9 | $ | 0.7 | ||||
Future expenditures — Japanese Yen | ¥ | 3,491.2 | $ | 38.6 | ||||
Contracts-in-process, unbilled receivables — Japanese Yen | ¥ | 10.4 | $ | 0.1 | ||||
Future expenditures — EUROs | € | 6.2 | $ | 8.8 |
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To Sell | ||||||||||||
At | At | |||||||||||
Euro | Contract | Market | ||||||||||
Maturity | Amount | Rate | Rate | |||||||||
2009 | € | 65,540 | $ | 99,793 | $ | 91,376 | ||||||
2010 | 19,210 | 29,388 | 26,734 | |||||||||
2011 | 23,493 | 35,663 | 32,608 | |||||||||
€ | 108,243 | $ | 164,844 | $ | 150,718 | |||||||
To Buy | ||||||||||||
At | At | |||||||||||
Euro | Contract | Market | ||||||||||
Maturity | Amount | Rate | Rate | |||||||||
2009 | € | 4,520 | $ | 6,294 | $ | 6,315 |
Item 8. | Financial Statements and Supplementary Data |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
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• | The Company hired a Director of Tax, who assists our Vice President of Tax with the management of all tax planning, accounting and reporting processes. | |
• | The Company augmented its internal resources by engaging an accounting firm to assist in the preparation of our tax accounting and disclosure. | |
• | A full process evaluation was completed and process improvements were implemented. |
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Item 9B. | Other Information |
Item 10. | Directors and Executive Officers of the Registrant |
Name | Age | Position | ||||
Michael B. Targoff | 64 | Chief Executive Officer since March 1, 2006, President since January 2008 and Vice Chairman of the Board of Directors since November 2005. Prior to that, founder of Michael B. Targoff & Co. | ||||
C. Patrick DeWitt | 62 | Senior Vice President since January 2008. Vice President from November 2005 to January 2008. Vice President of Old Loral from January 2002 to November 2005. Chief Executive Officer of SS/L since June 2006. President of SS/L from November 2001 to June 2006. | ||||
Avi Katz | 50 | Senior Vice President, General Counsel and Secretary since January 2008. Vice President, General Counsel and Secretary from November 2005 to January 2008. Vice President, General Counsel and Secretary of Old Loral from November 1999 to November 2005. | ||||
Richard P. Mastoloni | 44 | Senior Vice President of Finance and Treasurer since January 2008. Vice President and Treasurer from November 2005 to January 2008. Vice President and Treasurer of Old Loral from February 2002 to November 2005. Vice President of Old Loral from September 2001 to February 2002. | ||||
Harvey B. Rein | 55 | Senior Vice President and Chief Financial Officer since January 2008. Vice President and Controller from November 2005 to January 2008. Vice President and Controller of Old Loral from April 1996 to November 2005. | ||||
John Capogrossi | 55 | Vice President and Controller since January 2008. Executive Director, Financial Planning and Analysis, from October 2006 to January 2008. Assistant Controller from November 2005 to October 2006. Assistant Controller of Old Loral from January 2001 to November 2005. |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. | Certain Relationships and Related Transactions |
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Item 14. | Principal Accountant Fees and Services |
Item 15. | Exhibits and Financial Statement Schedules |
Index to Financial Statements and Financial Statement Schedule | F-1 | |||
Loral Space & Communications Inc. and Subsidiaries: | ||||
Report of Independent Registered Public Accounting Firm | F-2 | |||
Consolidated Balance Sheets as of December 31, 2008 and 2007 | F-3 | |||
Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006 | F-4 | |||
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2008, 2007 and 2006 | F-5 | |||
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006 | F-6 | |||
Notes to Consolidated Financial Statements | F-7 | |||
(a) 2. Financial Statement Schedule | ||||
Schedule II | F-69 | |||
Separate Financial Statements of Subsidiaries not consolidated Pursuant toRule 3-09 ofRegulation S-X | ||||
Telesat Holdings Inc. and Subsidiaries: | ||||
Report of Independent Registered Accountants | F-70 | |||
Comments by Independent Registered Chartered Accountants on Canada — United States of America Reporting Difference | F-71 | |||
Consolidated Statements of (Loss) Earnings for the year ended December 31, 2008 and the period October 31, 2007 to December 31, 2007 | F-72 | |||
Consolidated Statements of Comprehensive (Loss) Income for the year ended December 31, 2008 and the period October 31, 2007 to December 31, 2007 | F-73 | |||
Consolidated Statements of Shareholders’ Equity for the year ended December 31, 2008 and the period October 31, 2007 to December 31, 2007 | F-74 | |||
Consolidated Balance Sheets as of December 31, 2008 and 2007 | F-75 | |||
Consolidated Statements of Cash Flow for the year ended December 31, 2008 and the period October 31, 2007 to December 31, 2007 | F-76 | |||
Notes to Consolidated Financial Statements | F-77 | |||
XTAR, L.L.C.: | ||||
Report of Independent Registered Public Accounting Firm | F-121 | |||
Consolidated Balance Sheets as of December 31, 2008 and 2007 | F-122 | |||
Consolidated Statements of Operations for the years ended December 31, 2008, 2007, and 2006 | F-123 | |||
Consolidated Statements of Members’ Equity for the years ended December 31, 2008, 2007, and 2006 | F-124 | |||
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007, and 2006 | F-125 | |||
Notes to Consolidated Financial Statements | F-126 |
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Exhibit | ||||
Number | Description | |||
2 | .1 | Debtors’ Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code dated June 3, 2005(1) | ||
2 | .2 | Modification to Debtors’ Fourth Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code dated August 1, 2005(2) | ||
2 | .3 | Letter Agreement among Loral Space & Communications Inc., Loral Skynet Corporation, Public Sector Pension Investment Board, 4363205 Canada Inc. and 4363213 Canada Inc. dated December 14, 2006(6) | ||
2 | .4 | Share Purchase Agreement among 4363213 Canada Inc., BCE Inc. and Telesat Canada dated December 16, 2006(6) | ||
2 | .5 | Letter Agreement among Loral Space & Communications Inc., Public Sector Pension Investment Board and BCE Inc. dated December 16, 2006(6) | ||
2 | .6 | Asset Transfer Agreement, dated as of August 7, 2007, by and among 4363205 Canada Inc., Loral Skynet Corporation and Loral Space & Communications Inc.(9) | ||
2 | .7 | Amendment No. 1 to Asset Transfer Agreement, dated as of September 24, 2007, by and among 4363205 Canada Inc., Loral Skynet Corporation and Loral Space & Communications Inc.(10) | ||
2 | .8 | Asset Purchase Agreement, dated as of August 7, 2007, by and among Loral Skynet Corporation, Skynet Satellite Corporation and Loral Space & Communications Inc.(9) | ||
3 | .1 | Amended and Restated Certificate of Incorporation of Loral Space & Communications Inc. dated December 23, 2008(20) | ||
3 | .2 | Amended and Restated Bylaws of Loral Space & Communications Inc. dated December 23, 2008(20) | ||
10 | .1 | Amended and Restated Customer Credit Agreement, dated as of July 30, 2007, by and between Sirius Satellite Radio Inc. and Space Systems/Loral, Inc.(8) | ||
10 | .2 | First Amendment and Waiver to Amended and Restated Credit Agreement dated as of May 22, 2008 between Sirius Satellite Radio Inc. and Space Systems/Loral, Inc.(15) | ||
10 | .3 | Credit Agreement, dated as of October 16, 2008, among Space Systems/Loral, Inc., as Borrower, the several lenders from time to time party thereto, Bank of America, N.A., as Documentation Agent, ING Bank, N.V., as Syndication Agent, and JPMorgan Chase Bank, N.A., as Administrative Agent(18) | ||
10 | .4 | Parent Guarantee Agreement, dated as of October 22, 2008, by Loral Space & Communications Inc. in favor of JPMorgan Chase Bank, N.A., as Administrative Agent.(18) | ||
10 | .5 | Ancillary Agreement, dated as of August 7, 2007, by and among Loral Space & Communications Inc., Loral Skynet Corporation, Public Sector Pension Investment Board, 4363205 Canada Inc. and 4363230 Canada Inc.(9) | ||
10 | .6 | Adjustment Agreement, dated as of October 29, 2007, between Telesat Interco Inc. (formerly 4363213 Canada Inc.), BCE Inc. and Telesat Canada(11) | ||
10 | .7 | Omnibus Agreement, dated as of October 30, 2007, by and among Loral Space & Communications Inc., Loral Skynet Corporation, Public Sector Pension Investment Board, Red Isle Private Investments Inc. and Telesat Holdings Inc. (formerly 4363205 Canada Inc.)(11) | ||
10 | .8 | Shareholders Agreement, dated as of October 31, 2007, between Public Sector Pension Investment Board, Red Isle Private Investments Inc., Loral Space & Communications Inc., Loral Space & Communications Holdings Corporation, Loral Holdings Corporation, Loral Skynet Corporation, John P. Cashman, Colin D. Watson, Telesat Holdings Inc. (formerly 4363205 Canada Inc.), Telesat Interco Inc. (formerly 4363213 Canada Inc.), Telesat Canada and MHR Fund Management LLC(11) | ||
10 | .9 | Consulting Services Agreement, dated as of October 31, 2007, by and between Loral Space & Communications Inc. and Telesat Canada(11) | ||
10 | .10 | Indemnity Agreement, dated as of October 31, 2007, by and among Loral Space & Communications Inc., Telesat Canada, Telesat Holdings Inc., Telesat Interco Inc. and Henry Gerard (Hank) Intven(11) | ||
10 | .11 | Acknowledgement and Indemnity Agreement, dated as of October 31, 2007, between Loral Space & Communications Inc., Telesat Canada, Telesat Holdings Inc. (formerly 4363205 Canada Inc.), Telesat Interco Inc. (formerly 4363213 Canada Inc.) and McCarthy Tétrault LLP(11) | ||
10 | .12 | Amended and Restated Registration Rights Agreement dated December 23, 2008 by and among Loral Space & Communications Inc. and the Persons Listed on the Signature Pages Thereof(20) |
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Exhibit | ||||
Number | Description | |||
10 | .13 | Partnership Interest Purchase Agreement dated December 21, 2007 by and among GSSI, LLC, Globalstar, Inc., Loral/DASA Globalstar, LP, Globalstar do Brasil, SA., Loral/DASA do Brasil Holdings Ltda., Loral Holdings LLC, Global DASA LLC, LGP (Bermuda) Ltd., Mercedes-Benz do Brasil Ltda. (f/k/a DaimlerChrysler do Brasil Ltda.) and Loral Space & Communications Inc.(12) | ||
10 | .14 | Beam Sharing Agreement, dated as of January 11, 2008, by and between Loral Space & Communications Inc. and ViaSat Inc.(13) | ||
10 | .15 | Option Agreement, dated as of January 11, 2008, by and between Loral Space & Communications Inc. and Telesat Canada(13) | ||
10 | .16 | Employment Agreement between Loral Space & Communications Inc. and Michael B. Targoff dated as of March 28, 2006 and amended and restated as of December 17, 2008† ‡ | ||
10 | .17 | Form of Officers’ and Directors’ Indemnification Agreement between Loral Space & Communications Inc. and Loral Executives(3) ‡ | ||
10 | .18 | Officers’ and Directors’ Indemnification Agreement between Space Systems/Loral, Inc. and C. Patrick DeWitt dated November 21, 2005(3)‡ | ||
10 | .19 | Loral Space Management Incentive Bonus Program (Adopted as of December 17, 2008) (20) ‡ | ||
10 | .20 | Loral Space & Communications Inc. 2005 Stock Incentive Plan (Amended and Restated as of November 7, 2008)† ‡ | ||
10 | .21 | Form of Amended and Restated Non-Qualified Stock Option Agreement under Loral Space & Communications Inc. 2005 Stock Incentive Plan for Senior Management dated as of December 21, 2005 and amended and restated as of November 10, 2008† ‡ | ||
10 | .22 | Non-Qualified Stock Option Agreement under Loral Space & Communications Inc. 2005 Stock Incentive Plan between Loral Space & Communications Inc. and Michael B. Targoff dated March 28, 2006(4) ‡ | ||
10 | .23 | Restricted Stock Unit Agreement dated March 5, 2009 between Loral Space & Communications Inc. and Michael B. Targoff(21) | ||
10 | .24 | Restricted Stock Unit Agreement dated March 5, 2009 between Loral Space & Communications Inc. and C. Patrick DeWitt(21) | ||
10 | .25 | Form of Director 2006 Restricted Stock Agreement(7) ‡ | ||
10 | .26 | Form of Director 2007 Restricted Stock Agreement(7) ‡ | ||
10 | .27 | Form of Director 2008 Restricted Stock Agreement† ‡ | ||
10 | .28 | Form of Employee Restricted Stock Agreement(7) ‡ | ||
10 | .29 | Amended and Restated Space Systems/Loral, Inc. Supplemental Executive Retirement Plan (Amended and Restated as of December 17, 2008) (20) ‡ | ||
10 | .30 | Loral Savings Supplemental Executive Retirement Plan (Amended and Restated as of December 17, 2008) (20) ‡ | ||
10 | .31 | Loral Space & Communications Inc. Severance Policy for Corporate Officers (Amended and Restated as of December 17, 2008) (20) ‡ | ||
14 | .1 | Code of Conduct, Revised as of June 11, 2008(16) | ||
21 | .1 | List of Subsidiaries of the Registrant† | ||
23 | .1 | Consent of Deloitte & Touche LLP† | ||
23 | .2 | Consent of Deloitte & Touche LLP† | ||
23 | .3 | Consent of Deloitte & Touche LLP† | ||
31 | .1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 302 of the Sarbanes-Oxley Act of 2002† | ||
31 | .2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 302 of the Sarbanes-Oxley Act of 2002† | ||
32 | .1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002† |
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Exhibit | ||||
Number | Description | |||
32 | .2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002† | ||
99 | .1 | Credit Agreement, dated as of October 31, 2007, among Telesat Interco Inc. (formerly 4363213 Canada Inc.), Telesat Holdings Inc. (formerly 4363205 Canada Inc.), 4363230 Canada Inc., Telesat LLC, certain subsidiaries of Telesat Holdings Inc., as guarantors, the lenders party thereto from time to time, Morgan Stanley Senior Funding, Inc., as administrative agent, and Morgan Stanley & Co. Incorporated, as collateral agent for the lenders, UBS Securities LLC, as syndication agent, JPMorgan Chase Bank, N.A., The Bank of Nova Scotia, as issuing bank, and Citibank, N.A., Canadian Branch or any of its lending affiliates, as co-documentation agents, and Morgan Stanley & Co. Incorporated, UBS Securities LLC and J.P. Morgan Securities Inc., as joint lead arrangers and joint book running managers(11) | ||
99 | .2 | Articles of Incorporation of Telesat Holdings Inc. (formerly 4363205 Canada Inc.)(11) | ||
99 | .3 | By-Law No. 1 of Telesat Holdings Inc. (formerly 4363205 Canada Inc.)(11) | ||
99 | .4 | Letter Agreement dated March 28, 2008 among Loral Space & Communications Inc., Loral Skynet Corporation, Public Sector Pension Investment Board, Red Isle Private Investment Inc. and Telesat Holdings Inc.(14) | ||
99 | .5 | Memorandum Opinion dated September 19, 2008 of the Court of Chancery of the State of Delaware in In re Loral Space & Communications Inc. Consolidated Litigation and GPC XLI L.L.C., et al. v. Loral Space & Communications Inc., et al.(17) | ||
99 | .6 | Implementing Order of the Court of Chancery of the State of Delaware dated November 10, 2008(19) |
(1) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on June 8, 2005. | |
(2) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on August 5, 2005. | |
(3) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on November 23, 2005. | |
(4) | Incorporated by reference from the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2005. | |
(5) | Incorporated by reference from the Company’s Current Report onForm 8-K/A filed by the Company on June 26, 2006. | |
(6) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on December 21, 2006. | |
(7) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on May 29, 2007. | |
(8) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on August 2, 2007. | |
(9) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on August 9, 2007. | |
(10) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on September 27, 2007. | |
(11) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on November 2, 2007. | |
(12) | Incorporated by reference from the Company’s Current Report onForm 8-K filed December 21, 2007. | |
(13) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on January 16, 2008. | |
(14) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on March 31, 2008. | |
(15) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on May 28, 2008. | |
(16) | Incorporated by reference from the Company’s Current Quarterly Report onForm 10-Q filed on June 16, 2008. | |
(17) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on September 23, 2008. | |
(18) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on October 22, 2008. | |
(19) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on November 12, 2008. | |
(20) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on December 23, 2008. | |
(21) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on March 10, 2009. | |
† | Filed herewith. | |
‡ | Management compensation plan. |
74
Table of Contents
By: | /s/ MICHAEL B. TARGOFF |
Dated: March 16, 2009
Signatures | Title | Date | ||||
/s/ MICHAEL B. TARGOFF Michael B. Targoff | Vice Chairman of the Board, Chief Executive Officer and President | March 16, 2009 | ||||
/s/ MARK H. RACHESKY, M.D. Mark H. Rachesky, M.D. | Director, Non-Executive Chairman of the Board | March 16, 2009 | ||||
/s/ SAI S. DEVABHAKTUNI Sai S. Devabhaktuni | Director | March 16, 2009 | ||||
/s/ HAL GOLDSTEIN Hal Goldstein | Director | March 16, 2009 | ||||
/s/ JOHN D. HARKEY, JR. John D. Harkey, Jr. | Director | March 16, 2009 | ||||
/s/ ARTHUR L. SIMON Arthur L. Simon | Director | March 16, 2009 | ||||
/s/ JOHN P. STENBIT John P. Stenbit | Director | March 16, 2009 | ||||
/s/ HARVEY B. REIN Harvey B. Rein | Senior Vice President and CFO (Principal Financial Officer) | March 16, 2009 | ||||
/s/ JOHN CAPOGROSSI John Capogrossi | Vice President and Controller (Principal Accounting Officer) | March 16, 2009 |
75
Loral Space & Communications Inc. and Subsidiaries | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-69 | ||||
Separate Financial Statements of Subsidiaries not consolidated Pursuant toRule 3-09 ofRegulation S-X | ||||
Telesat Holdings Inc. and Subsidiaries: | ||||
F-70 | ||||
F-71 | ||||
F-72 | ||||
F-73 | ||||
F-74 | ||||
F-75 | ||||
F-76 | ||||
F-77 | ||||
XTAR, L.L.C.: | ||||
F-121 | ||||
F-122 | ||||
F-123 | ||||
F-124 | ||||
F-125 | ||||
F-126 |
F-1
Table of Contents
F-2
Table of Contents
December 31, | ||||||||
2008 | 2007 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 117,548 | $ | 314,694 | ||||
Contracts-in-process | 213,651 | 109,376 | ||||||
Inventories | 109,755 | 96,968 | ||||||
Restricted cash | 690 | 12,816 | ||||||
Other current assets | 53,596 | 36,034 | ||||||
Total current assets | 495,240 | 569,888 | ||||||
Property, plant and equipment, net | 188,270 | 147,828 | ||||||
Long-term receivables | 184,701 | 132,400 | ||||||
Investments in affiliates | 72,642 | 566,196 | ||||||
Goodwill | — | 227,058 | ||||||
Intangible assets, net | 31,578 | 42,854 | ||||||
Other assets | 23,436 | 16,715 | ||||||
Total assets | $ | 995,867 | $ | 1,702,939 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 91,052 | $ | 69,205 | ||||
Accrued employment costs | 41,819 | 42,890 | ||||||
Customer advances and billings in excess of costs and profits | 184,592 | 251,954 | ||||||
Income taxes payable | 233 | 31,239 | ||||||
Accrued interest and preferred dividends | 207 | 4,979 | ||||||
Other current liabilities | 31,471 | 39,512 | ||||||
Total current liabilities | 349,374 | 439,779 | ||||||
Borrowings under revolving credit facility | 55,000 | — | ||||||
Pension and other postretirement liabilities | 230,660 | 152,341 | ||||||
Long-term liabilities | 151,176 | 137,261 | ||||||
Total liabilities | 786,210 | 729,381 | ||||||
Commitments and contingencies Shareholders’ equity: | ||||||||
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding at December 31, 2008 | — | — | ||||||
Series A-1 cumulative 7.5% convertible preferred stock, $0.01 par value; 2,200,000 shares authorized, 141,953 shares issued and outstanding at December 31, 2007 | — | 41,873 | ||||||
Series B-1 cumulative 7.5% convertible preferred stock, $0.01 par value; 2,000,000 shares authorized, 900,821 shares issued and outstanding at December 31, 2007 | — | 265,777 | ||||||
Common Stock: | ||||||||
Voting common stock, $.01 par value; 30,494,327 shares authorized, 20,286,992 and 20,292,746 shares issued and outstanding | 203 | 203 | ||||||
Non-voting common stock, $0.1 par value; 9,505,673 shares authorized, issued and outstanding at December 31, 2008 | 95 | — | ||||||
Paid-in capital | 1,007,011 | 663,127 | ||||||
Accumulated deficit | (750,922 | ) | (33,939 | ) | ||||
Accumulated other comprehensive (loss) income | (46,730 | ) | 36,517 | |||||
Total shareholders’ equity | 209,657 | 973,558 | ||||||
Total liabilities and shareholders’ equity | $ | 995,867 | $ | 1,702,939 | ||||
F-3
Table of Contents
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Revenues from satellite manufacturing | $ | 869,398 | $ | 761,363 | $ | 636,632 | ||||||
Revenues from satellite services | — | 121,091 | 160,701 | |||||||||
Total revenues | 869,398 | 882,454 | 797,333 | |||||||||
Cost of satellite manufacturing | 787,758 | 688,991 | 550,821 | |||||||||
Cost of satellite services | — | 86,213 | 98,614 | |||||||||
Selling, general and administrative expenses | 97,015 | 166,936 | 127,080 | |||||||||
Gain on recovery from customer bankruptcy | (9,338 | ) | — | — | ||||||||
Impairment of goodwill | 187,940 | — | — | |||||||||
Gain on contribution of Loral Skynet | — | (104,942 | ) | — | ||||||||
Gain on litigation settlement | — | — | (9,000 | ) | ||||||||
Operating (loss) income | (193,977 | ) | 45,256 | 29,818 | ||||||||
Interest and investment income | 11,857 | 39,279 | 31,526 | |||||||||
Interest expense | (2,268 | ) | (2,312 | ) | (23,449 | ) | ||||||
Gain (loss) on foreign exchange contracts | — | 89,364 | (5,750 | ) | ||||||||
Gain on litigation, net | 38,823 | — | — | |||||||||
Impairment of available for sale securities | (5,823 | ) | — | — | ||||||||
Loss on extinguishment of debt | — | (16,155 | ) | — | ||||||||
Other (expense) income | (135 | ) | 2,354 | (2,028 | ) | |||||||
(Loss) income before income taxes, equity in net losses of affiliates and minority interest | (151,523 | ) | 157,786 | 30,117 | ||||||||
Income tax provision | (45,744 | ) | (83,457 | ) | (20,880 | ) | ||||||
(Loss) income before equity in net losses of affiliates and minority interest | (197,267 | ) | 74,329 | 9,237 | ||||||||
Equity in net losses of affiliates | (495,649 | ) | (21,430 | ) | (7,163 | ) | ||||||
Minority interest | — | (23,240 | ) | (24,794 | ) | |||||||
Net (loss) income | (692,916 | ) | 29,659 | $ | (22,720 | ) | ||||||
Preferred dividends | (24,067 | ) | (19,379 | ) | — | |||||||
Beneficial conversion feature related to the issuance of LoralSeries A-1 Preferred Stock | — | (25,685 | ) | — | ||||||||
Net loss applicable to common shareholders | $ | (716,983 | ) | $ | (15,405 | ) | $ | (22,720 | ) | |||
Basic and diluted loss per share: | ||||||||||||
Basic and diluted loss per share | $ | (35.13 | ) | $ | (0.77 | ) | $ | (1.14 | ) | |||
Weighted average shares outstanding: | ||||||||||||
Basic and diluted | 20,407 | 20,087 | 20,000 | |||||||||
F-4
Table of Contents
Series A-1 | Series B-1 | Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||
Convertible | Convertible | Common Stock | Other | |||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Voting | Non-Voting | Accumulated | Comprehensive | Total | ||||||||||||||||||||||||||||||||||||||||||
Shares | Shares | Shares | Shares | Paid-In | Earnings | Income | Shareholders’ | |||||||||||||||||||||||||||||||||||||||||
Issued | Amount | Issued | Amount | Issued | Amount | Issued | Amount | Capital | (Deficit) | (Loss) | Equity | |||||||||||||||||||||||||||||||||||||
Balance, January 1, 2006 | 20,000 | $ | 200 | $ | 642,210 | $ | (15,261 | ) | $ | 15 | $ | 627,164 | ||||||||||||||||||||||||||||||||||||
Adjustment to initially apply SFAS 158, net of tax | 29,951 | 29,951 | ||||||||||||||||||||||||||||||||||||||||||||||
Net loss | (22,720 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | 10,109 | |||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive loss | (12,611 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Stock based compensation | 2,498 | 2,498 | ||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2006 | 20,000 | 200 | 644,708 | (37,981 | ) | 40,075 | 647,002 | |||||||||||||||||||||||||||||||||||||||||
Cumulative effect related to adoption of FIN 48 | (6,238 | ) | (6,238 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Net income | 29,659 | |||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | (3,558 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income | 26,101 | |||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Series -1 preferred stock | 137 | $ | 40,237 | 859 | $ | 253,013 | (8,864 | ) | 284,386 | |||||||||||||||||||||||||||||||||||||||
Issuance of Series -1 preferred stock as payment for dividend | 5 | 1,636 | 42 | 12,764 | 14,400 | |||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 108 | 1 | 1,920 | 1,921 | ||||||||||||||||||||||||||||||||||||||||||||
Restricted shares surrendered to fund withholding taxes | (20 | ) | — | (982 | ) | (982 | ) | |||||||||||||||||||||||||||||||||||||||||
Stock based compensation | 205 | 2 | 26,345 | 26,347 | ||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | (19,379 | ) | (19,379 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2007 | 142 | 41,873 | 901 | 265,777 | 20,293 | 203 | 663,127 | (33,939 | ) | 36,517 | 973,558 | |||||||||||||||||||||||||||||||||||||
Net loss | (692,916 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | (83,247 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive loss | (776,163 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Series -1 preferred stock as payment for dividend | 3 | 822 | 78 | 23,427 | 24,249 | |||||||||||||||||||||||||||||||||||||||||||
Restricted shares surrendered to fund withholding taxes | (18 | ) | (338 | ) | (338 | ) | ||||||||||||||||||||||||||||||||||||||||||
Stock based compensation | 12 | 7,621 | 7,621 | |||||||||||||||||||||||||||||||||||||||||||||
Series-1 preferred dividends | — | 618 | — | 4,179 | 4,797 | |||||||||||||||||||||||||||||||||||||||||||
Cancellation and conversion of Series-1 preferred stock to non-voting common stock | (145 | ) | (43,313 | ) | (979 | ) | (293,383 | ) | 9,506 | 95 | 336,601 | |||||||||||||||||||||||||||||||||||||
Preferred stock dividends | (24,067 | ) | (24,067 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2008 | — | $ | — | — | $ | — | 20,287 | $ | 203 | 9,506 | $ | 95 | $ | 1,007,011 | $ | (750,922 | ) | $ | (46,730 | ) | $ | 209,657 | ||||||||||||||||||||||||||
F-5
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Operating activities: | ||||||||||||
Net (loss) income | $ | (692,916 | ) | $ | 29,659 | $ | (22,720 | ) | ||||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||||||
Non-cash items | 762,210 | (35,971 | ) | 108,584 | ||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | — | 64,828 | (9,129 | ) | ||||||||
Contracts-in-process | (216,354 | ) | (60,884 | ) | 5,551 | |||||||
Inventories | (12,787 | ) | (15,872 | ) | (31,990 | ) | ||||||
Long-term receivables | 13,947 | (266 | ) | (2,214 | ) | |||||||
Other current assets and other assets | 3,393 | 6,369 | 7,964 | |||||||||
Accounts payable | 23,681 | 6,041 | (12,812 | ) | ||||||||
Accrued expenses and other current liabilities | (22,455 | ) | 15,866 | 17,756 | ||||||||
Customer advances | (19,710 | ) | (17,751 | ) | 50,634 | |||||||
Income taxes payable | (55,034 | ) | 28,719 | 391 | ||||||||
Pension and other postretirement liabilities | (19,010 | ) | 8,663 | (20,453 | ) | |||||||
Long-term liabilities | 32,825 | (2,282 | ) | (3,725 | ) | |||||||
Other | — | 4 | 165 | |||||||||
Net cash (used in) provided by operating activities | (202,210 | ) | 27,123 | 88,002 | ||||||||
Investing activities: | ||||||||||||
Capital expenditures | (64,559 | ) | (95,761 | ) | (82,157 | ) | ||||||
Decrease (increase) in restricted cash in escrow | 18,637 | (19,709 | ) | (323 | ) | |||||||
Proceeds received for the contribution of Loral Skynet net of cash contributed | — | 57,591 | — | |||||||||
Proceeds received from disposition of orbital slot | — | — | 5,742 | |||||||||
Distribution from an equity investment | — | 2,955 | 250 | |||||||||
Proceeds from the sale of short-term investments and available-for-sale securities | 162 | 468,571 | 7,098 | |||||||||
Purchase of short-term investments | (500 | ) | (350,895 | ) | (106,588 | ) | ||||||
Investments in and advances to affiliates | (1,048 | ) | (1,233 | ) | — | |||||||
Net cash (used in) provided by investing activities | (47,308 | ) | 61,519 | (175,978 | ) | |||||||
Financing activities: | ||||||||||||
Borrowings under SS/L revolving credit facility | 55,000 | — | — | |||||||||
Debt issuance costs | (2,628 | ) | — | — | ||||||||
Proceeds from term loan (Loral Skynet Notes refinancing facility) | — | 141,050 | — | |||||||||
Repayment of Loral Skynet Notes | — | (126,000 | ) | — | ||||||||
10% redemption fee on extinguishment of Loral Skynet Notes | — | (12,600 | ) | — | ||||||||
Preferred stock issuance costs | — | (8,864 | ) | — | ||||||||
Proceeds from the sale of Series-1 preferred stock | — | 293,250 | — | |||||||||
Redemption of Loral Skynet Preferred Stock | — | (237,599 | ) | — | ||||||||
Proceeds from the exercise of stock options | — | 2,097 | — | |||||||||
Cash dividends paid on Loral Skynet Preferred Stock | — | (11,824 | ) | (1,278 | ) | |||||||
Net cash provided by (used in) financing activities | 52,372 | 39,510 | (1,278 | ) | ||||||||
(Decrease) increase in cash and cash equivalents | (197,146 | ) | 128,152 | (89,254 | ) | |||||||
Cash and cash equivalents — beginning of year | 314,694 | 186,542 | 275,796 | |||||||||
Cash and cash equivalents — end of year | $ | 117,548 | $ | 314,694 | $ | 186,542 | ||||||
F-6
Table of Contents
1. | Organization and Principal Business |
F-7
Table of Contents
2. | Basis of Presentation |
F-8
Table of Contents
F-9
Table of Contents
Years | ||||
Land improvements | 20 | |||
Buildings and building improvements | 10 to 45 | |||
Leasehold improvements | 2 to 17 | |||
Equipment, furniture and fixtures | 5 to 10 |
F-10
Table of Contents
F-11
Table of Contents
F-12
Table of Contents
F-13
Table of Contents
F-14
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Non-cash operating items: | ||||||||||||
Gain on contribution of Loral Skynet | $ | — | $ | (104,942 | ) | $ | — | |||||
Equity in net losses of affiliates | 495,649 | 21,430 | 7,163 | |||||||||
Satmex settlement | — | — | (18,605 | ) | ||||||||
Minority interest | — | 23,240 | 24,794 | |||||||||
Deferred taxes | 29,385 | 32,205 | 9,105 | |||||||||
Depreciation and amortization | 36,367 | 76,910 | 68,300 | |||||||||
Stock based compensation | 7,621 | 26,347 | 2,997 | |||||||||
Impairment of cost basis investment | — | — | 3,000 | |||||||||
Provisions for inventory obsolescence | — | 543 | 1,678 | |||||||||
Warranty expense accruals (accrual reversals) | 431 | (18,879 | ) | 12,180 | ||||||||
(Recoveries of) provisions for bad debts on billed receivables | 700 | (1,917 | ) | 356 | ||||||||
Adjustment to revenue straightlining assessment | — | (204 | ) | — | ||||||||
Write-off of construction in process | — | 2,164 | — | |||||||||
Loss on disposition of fixed assets | 63 | — | — | |||||||||
Loss on extinguishment of debt | — | 16,155 | — | |||||||||
Impairment of goodwill | 187,940 | |||||||||||
Impairment of available for sale securities | 5,823 | — | — | |||||||||
Curtailment gain | — | (1,686 | ) | — | ||||||||
Amortization of prior service credit and actuarial gains | (3,200 | ) | (3,285 | ) | — | |||||||
Gain on disposition of an orbital slot | — | (3,600 | ) | (1,149 | ) | |||||||
Amortization of fair value adjustments related to orbital incentives | (3,088 | ) | — | — | ||||||||
Gain on disposition of available for sale securities | (162 | ) | (11,088 | ) | (7,098 | ) | ||||||
Unrealized loss on non-qualified pension plan assets | 1,391 | — | — | |||||||||
Non-cash net interest | (149 | ) | — | 113 | ||||||||
Loss/(gain) on foreign currency transactions and contracts | 3,439 | (89,364 | ) | 5,750 | ||||||||
Net non-cash operating items | $ | 762,210 | $ | (35,971 | ) | $ | 108,584 | |||||
Non-cash investing activities: | ||||||||||||
Available for sale securities received in connection with the sale of Globalstar do Brazil | $ | 6,000 | $ | — | $ | — | ||||||
Capital expenditures incurred not yet paid | $ | 1,706 | $ | — | $ | — | ||||||
Investment in affiliate not yet paid | $ | 1,048 | $ | — | $ | — | ||||||
F-15
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Non-cash financing activities: | ||||||||||||
Issuance of Preferred stock by subsidiary as payment for dividend | $ | — | $ | 23,343 | $ | 14,260 | ||||||
Issuance of Loral Series-1 Preferred Stock as payment for dividend | $ | 24,248 | $ | 14,400 | $ | — | ||||||
Accrued dividends on LoralSeries-1 Preferred Stock | $ | 4,797 | $ | 4,979 | $ | — | ||||||
Issuance of non-voting common stock and cancellation of LoralSeries-1 Preferred Stock | $ | 336,696 | $ | — | $ | — | ||||||
Supplemental information: | ||||||||||||
Interest paid | $ | 2,380 | $ | 24,891 | $ | 17,921 | ||||||
Taxes paid, net of refunds | $ | 29,835 | $ | 5,292 | $ | 6,365 | ||||||
Cash paid for reorganization items: | ||||||||||||
Professional fees | $ | (160 | ) | $ | (9,581 | ) | ||||||
Restructuring costs | $ | — | $ | (740 | ) | |||||||
Interest income | $ | — | $ | — | ||||||||
Vendor settlement | $ | — | $ | (432 | ) | |||||||
F-16
Table of Contents
F-17
Table of Contents
3. | Accumulated Other Comprehensive Income (Loss) |
Accumulated Other Comprehensive Income (Loss) | ||||||||
December 31, | ||||||||
2008 | 2007 | |||||||
Cumulative translation adjustment | $ | — | $ | 498 | ||||
Proportionate share of Telesat Holdco other comprehensive income | (4,065 | ) | — | |||||
Reclassification of our proportionate share of Telesat Holdco other comprehensive income | 4,065 | — | ||||||
Unrealized gain on foreign currency hedge | 18,182 | — | ||||||
Unrealized gains on available-for-sale securities, net of taxes of $(2,108) and $(4,447) for 2008 and 2007, respectively | 3,302 | 6,987 | ||||||
Reclassification adjustment for (losses) included in net income, net of taxes of $2,204 and $4,542 for 2008 and 2007, respectively | (3,186 | ) | (6,546 | ) | ||||
Net actuarial (losses) gains, net of taxes of $(26,123) and $(26,086) for 2008 and 2007, respectively | (57,288 | ) | 40,072 | |||||
Amortization of actuarial gains and prior service credits | (5,246 | ) | (2,000 | ) | ||||
Reclassification due to contribution of Loral Skynet, net of taxes of $3,015 for 2008 and 2007 | (2,494 | ) | (2,494 | ) | ||||
Total | $ | (46,730 | ) | $ | 36,517 | |||
Other Comprehensive Income (Loss) | ||||||||||||
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Cumulative translation adjustment | $ | (498 | ) | $ | 211 | $ | 272 | |||||
Proportionate share of Telesat Holdco other comprehensive income | (4,065 | ) | — | — | ||||||||
Reclassification of our proportionate share of Telesat Holdco other comprehensive income | 4,065 | — | — | |||||||||
Unrealized gain on foreign currency hedge | 18,182 | — | — | |||||||||
Unrealized (losses) gains on available-for-sale securities, net of taxes of $2,339, $1,976 and $(6,423) for 2008,2007 and 2006, respectively | (3,685 | ) | (2,850 | ) | 9,837 | |||||||
Reclassification adjustment for gains (losses) included in net income, net of taxes of $(2,338) and $4,542 for 2008 and 2007, respectively | 3,360 | (6,546 | ) | — | ||||||||
Net actuarial (losses) gains, net of taxes of $(37) and $(6,532) for 2008 and 2007, respectively | (97,360 | ) | 10,121 | — | ||||||||
Amortization of actuarial gains and prior service credits | (3,246 | ) | (2,000 | ) | — | |||||||
Reclassification due to contribution of Loral Skynet, net of taxes of $3,015 for 2007 | — | (2,494 | ) | — | ||||||||
Adjustment to initially apply SFAS 158, net of taxes of $(19,554) for 2006 | — | — | 29,951 | |||||||||
Total | $ | (83,247 | ) | $ | (3,558 | ) | $ | 40,060 | ||||
F-18
Table of Contents
4. | Contracts-in-Process and Long-Term Receivables |
December 31, | ||||||||
2008 | 2007 | |||||||
U.S. government contracts: | ||||||||
Amounts billed | $ | 2,218 | $ | 193 | ||||
Unbilled receivables | 2,448 | 1,166 | ||||||
4,666 | 1,359 | |||||||
Commercial contracts: | ||||||||
Amounts billed | 120,237 | 60,355 | ||||||
Unbilled receivables | 88,748 | 47,662 | ||||||
208,985 | 108,017 | |||||||
$ | 213,651 | $ | 109,376 | |||||
Long-Term | ||||
Receivables | ||||
2009 | $ | 2,728 | ||
2010 | 4,669 | |||
2011 | 16,746 | |||
2012 | 12,309 | |||
2013 | 12,757 | |||
Thereafter | 138,220 | |||
187,429 | ||||
Less, current portion included incontracts-in-process | (2,728 | ) | ||
Long-term receivables | $ | 184,701 | ||
F-19
Table of Contents
5. | Property, Plant and Equipment |
December 31, | ||||||||
2008 | 2007 | |||||||
Land and land improvements | $ | 26,913 | $ | 26,799 | ||||
Buildings | 59,038 | 49,917 | ||||||
Leasehold improvements | 10,870 | 8,691 | ||||||
Equipment, furniture and fixtures | 133,916 | 94,844 | ||||||
Satellite capacity under construction (see note 16) | 10,478 | — | ||||||
Other construction in progress | 21,863 | 18,552 | ||||||
263,078 | 198,803 | |||||||
Accumulated depreciation and amortization | (74,808 | ) | (50,975 | ) | ||||
$ | 188,270 | $ | 147,828 | |||||
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6. | Investments in Affiliates |
December 31, | ||||||||
2008 | 2007 | |||||||
Telesat Holdings Inc.(1) | $ | — | $ | 479,579 | ||||
XTAR, LLC | 70,547 | 86,617 | ||||||
Other | 2,095 | — | ||||||
$ | 72,642 | $ | 566,196 | |||||
(1) | As of December 31, 2008 our investment in Telesat Canada has been reduced to zero as a result of recording our interest in Telesat Canada’s losses. Equity in losses of affiliates is not recognized after the carrying value of an investment, including advances and loans, has been reduced to zero, unless guarantees or other funding obligations exist. |
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Telesat Holdings Inc. | $ | (479,579 | ) | $ | (1,792 | ) | $ | — | ||||
XTAR, LLC | (16,070 | ) | (10,585 | ) | (7,413 | ) | ||||||
Globalstar, L.P. and Globalstar service provider partnerships | — | (9,053 | ) | 250 | ||||||||
$ | (495,649 | ) | $ | (21,430 | ) | $ | (7,163 | ) | ||||
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Revenues | $ | 83,974 | $ | 21,968 | $ | 11,262 | ||||||
Elimination of Loral’s proportionate share of (profits) losses relating to affiliate transactions | (4,969 | ) | 1,935 | 412 | ||||||||
Profits (losses) relating to affiliate transactions not eliminated | 2,808 | (1,082 | ) | (324 | ) |
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Current assets | $ | 25,360 | ||
Property, plant and equipment, net | 443,776 | |||
Foreign currency contracts | 83,614 | |||
Goodwill | 42,246 | |||
Intangible assets, net | 50,404 | |||
Other assets | 3,183 | |||
Total assets | $ | 648,583 | ||
Current liabilities | $ | 181,045 | ||
Long-term liabilities | 27,000 | |||
Total liabilities | $ | 208,045 | ||
Consideration received for the contribution of Loral Skynet to Telesat Holdco: | ||||
Cash and marketable securities | $ | 61,480 | ||
Fair value of equity in Telesat Holdco | 670,562 | |||
Total consideration | 732,042 | |||
Book value of contributed net assets of Loral Skynet | 440,538 | |||
Consideration in excess of book value | $ | 291,504 | ||
Gain recognized | $ | 104,942 | ||
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For the Period | ||||||||
October 31, | ||||||||
For the Year Ended | 2007 | |||||||
December 31, | to December 31, | |||||||
2008 | 2007 | |||||||
Statement of Operations Data: | ||||||||
Revenues | $ | 685,187 | $ | 117,767 | ||||
Operating expenses | (258,010 | ) | (52,484 | ) | ||||
Impairment of long-lived and intangible assets | (454,896 | ) | — | |||||
Depreciation, amortization and stock-based compensation | (225,949 | ) | (41,200 | ) | ||||
Operating income | (253,668 | ) | 24,083 | |||||
Interest expense | (231,062 | ) | (41,375 | ) | ||||
Other expense, net | (403,102 | ) | (45,550 | ) | ||||
Income tax benefit | 139,872 | 61,520 | ||||||
Net loss | (747,960 | ) | (1,322 | ) |
December 31, 2008 | December 31, 2007 | |||||||
Balance Sheet Data: | ||||||||
Current assets | $ | 179,769 | $ | 143,656 | ||||
Total assets | 4,273,162 | 5,610,047 | ||||||
Current liabilities | 171,423 | 229,540 | ||||||
Long-term debt, including current portion | 2,901,620 | 2,828,017 | ||||||
Total liabilities | 3,760,164 | 4,156,720 | ||||||
Redeemable preferred stock | 116,044 | 143,138 | ||||||
Shareholders’ equity | 396,954 | 1,310,189 |
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Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Revenues | $ | 20,405 | $ | 19,339 | $ | 15,334 | ||||||
Operating expenses | (34,500 | ) | (24,015 | ) | (14,262 | ) | ||||||
Depreciation and amortization | (9,650 | ) | (9,747 | ) | (9,681 | ) | ||||||
Operating loss | (23,751 | ) | (14,423 | ) | (8,633 | ) | ||||||
Net loss | (28,597 | ) | (18,421 | ) | (12,629 | ) |
December 31, | ||||||||
2008 | 2007 | |||||||
Balance Sheet Data: | ||||||||
Current assets | $ | 9,107 | $ | 8,899 | ||||
Total assets | 115,437 | 124,898 | ||||||
Current liabilities | 41,314 | 29,650 | ||||||
Total liabilities | 79,386 | 64,440 | ||||||
Members’ equity | 36,051 | 60,458 |
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7. | Goodwill and Intangible Assets |
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Goodwill — January 1, 2007 | $ | 305,691 | ||
Cumulative effect of adopting FIN 48 | 7,542 | |||
Settlement of FIN 48 liabilities | (2,000 | ) | ||
Reversal of excess valuation allowance on deferred tax assets | (35,088 | ) | ||
Reversal of Old Loral deferred state tax liabilities | (6,840 | ) | ||
Contribution of Loral Skynet to Telesat Canada | (42,247 | ) | ||
Goodwill — December 31, 2007 | 227,058 | |||
Reversal of FIN 48 liabilities for statute expiration | (531 | ) | ||
Reversal of excess valuation allowance on deferred tax assets | (38,587 | ) | ||
Goodwill impairment charge | (187,940 | ) | ||
Goodwill — December 31, 2008 | $ | — | ||
Weighted Average | ||||||||||||||||||||
Remaining | December 31, 2008 | December 31, 2007 | ||||||||||||||||||
Amortization Period | Gross | Accumulated | Gross | Accumulated | ||||||||||||||||
(Years) | Amount | Amortization | Amount | Amortization | ||||||||||||||||
Internally developed software and technology | 3 | $ | 59,027 | $ | (35,154 | ) | $ | 59,027 | $ | (24,338 | ) | |||||||||
Trade names | 17 | 9,200 | (1,495 | ) | 9,200 | (1,035 | ) | |||||||||||||
Total | $ | 68,227 | $ | (36,649 | ) | $ | 68,227 | $ | (25,373 | ) | ||||||||||
2009 | $ | 11,276 | ||
2010 | 9,192 | |||
2011 | 2,931 | |||
2012 | 2,315 | |||
2013 | 460 |
8. | Debt Obligations |
December 31, | ||||||||
2008 | 2007 | |||||||
Space Systems/Loral, Inc Revolving Credit Facility | $ | 55,000 | $ | — |
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• | SS/L must not permit its consolidated leverage ratio as of (i) the last day of any period of four consecutive fiscal quarters or (ii) the date of incurrence of certain indebtedness to exceed 3.50 to 1.00 from October 16, 2008 to September 29, 2009, 3.25 to 1.00 from September 30, 2009 through December 30, 2009 and 3.00 to 1.00 from December 31, 2009 and thereafter until the Maturity Date. | |
• | SS/L must maintain a minimum consolidated interest coverage ratio of at least 3.50 to 1.00 as of the last day of any fiscal quarter for the period of four consecutive fiscal quarters ending on such day. |
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9. | Income Taxes |
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Current: | ||||||||||||
U.S. Federal | $ | (21,213 | ) | $ | 31,142 | $ | 4,018 | |||||
State and local | 37,572 | 19,712 | 2,467 | |||||||||
Foreign | — | 398 | 5,290 | |||||||||
Total current | $ | 16,359 | $ | 51,252 | $ | 11,775 | ||||||
Deferred: | ||||||||||||
U.S. Federal | (137,102 | ) | 47,209 | 7,342 | ||||||||
State and local | (36,023 | ) | (31,291 | ) | 1,763 | |||||||
Valuation allowance | 202,510 | 16,287 | — | |||||||||
Total deferred | 29,385 | 32,205 | 9,105 | |||||||||
Total income tax provision | $ | 45,744 | $ | 83,457 | $ | 20,880 | ||||||
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Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
Unrecognized tax benefits | $ | 25,962 | $ | 12,652 | ||||
Interest expense | 6,169 | 4,186 | ||||||
Interest income | — | (41 | ) | |||||
Penalties | 9,427 | 303 | ||||||
Total | $ | 41,558 | $ | 17,100 | ||||
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Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Tax provision( benefit) at U.S. Statutory Rate of 35% | $ | (53,033 | ) | $ | 55,225 | $ | 10,541 | |||||
Permanent adjustments which change statutory amounts: | ||||||||||||
State and local income taxes, net of federal income tax | 1,496 | (5,101 | ) | 2,749 | ||||||||
Additional tax imposed on foreign source income | 21 | 94 | 3,438 | |||||||||
Equity in net losses of affiliates | (173,477 | ) | (7,162 | ) | (2,585 | ) | ||||||
Impairment of goodwill | 65,779 | — | — | |||||||||
Losses in litigation | 6,815 | — | — | |||||||||
Tax gain on transfer of Loral Skynet assets to Telesat Canada | — | 16,419 | — | |||||||||
Provision for unrecognized tax benefits | (5,811 | ) | 8,370 | — | ||||||||
Nondeductible expenses | 1,501 | 2,682 | 3,065 | |||||||||
Change in valuation allowance | 202,510 | 16,287 | — | |||||||||
Other, net | (57 | ) | ( 3,357 | ) | 3,672 | |||||||
Total income tax provision | $ | 45,744 | $ | 83,457 | $ | 20,880 | ||||||
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Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
Balance at January 1 | $ | 59,903 | $ | 42,484 | ||||
Increases related to prior year tax positions | 5,312 | 157 | ||||||
Decreases related to prior year tax positions | (1,225 | ) | (342 | ) | ||||
Decrease as a result of statute expirations | (1,832 | ) | — | |||||
Decrease as a result of tax settlements | — | (1,508 | ) | |||||
Increases related to current year tax positions | 46,434 | 21,707 | ||||||
Decrease for indemnified liabilities transferred to Telesat Canada and recorded in other long term liabilities | — | (2,595 | ) | |||||
Balance at December 31 | $ | 108,592 | $ | 59,903 | ||||
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December 31, | ||||||||
2008 | 2007 | |||||||
Deferred tax assets: | ||||||||
Postretirement benefits other than pensions | $ | 28,321 | $ | 31,591 | ||||
Inventoried costs | 19,456 | 17,943 | ||||||
Net operating loss and tax credit carryforwards | 199,460 | 205,209 | ||||||
Compensation and benefits | 20,663 | 22,802 | ||||||
Deferred research & development costs | 14,126 | 18,948 | ||||||
Income recognition on long-term contracts | 13,382 | 26,707 | ||||||
Investments in and advances to affiliates | 138,524 | — | ||||||
Other, net | 7,370 | 7,086 | ||||||
Federal benefit of uncertain tax positions | 21,431 | 3,610 | ||||||
Pension costs | 69,772 | 35,612 | ||||||
Total deferred tax assets before valuation allowance | 532,505 | 369,508 | ||||||
Less valuation allowance | (487,762 | ) | (241,228 | ) | ||||
Net deferred tax asset | 44,743 | 128,280 | ||||||
Deferred tax liabilities: | ||||||||
Property, plant and equipment | (18,637 | ) | (18,653 | ) | ||||
Intangible assets | (13,582 | ) | (18,569 | ) | ||||
Investments in and advances to affiliates | — | (87,704 | ) | |||||
Total deferred tax liability | (32,219 | ) | (124,926 | ) | ||||
Net deferred tax asset | $ | 12,524 | $ | 3,354 | ||||
10. | Shareholders’ Equity and Minority Interest |
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Cash | PIK Dividends | Total | ||||||||||||||||||
Payment Date | Dividend Period | Dividends | Shares | Amount | Dividends | |||||||||||||||
November 5, 2007 | 7/14/07 to 11/05/07 | $ | 8,790 | — | $ | — | $ | 8,790 | ||||||||||||
July 13, 2007 | 1/14/07 to 7/13/07 | 1,260 | 61,282 | 12,260 | 13,520 | |||||||||||||||
January 12, 2007 | 7/14/06 to 1/13/07 | 1,770 | 55,434 | 11,090 | 12,860 | |||||||||||||||
July 14, 2006 | 11/21/05 to 7/13/06 | 1,270 | 71,281 | 14,260 | 15,530 |
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Year Ended | ||||||||
December 31, | ||||||||
2007 | 2006 | |||||||
Risk — free interest rate | 4.5 | % | 4.3 | % | ||||
Expected life (years) | 2.80 | 4.75 | % | |||||
Estimated volatility | 32.8 | % | 27.4 | % | ||||
Expected dividends | None | None |
Weighted | ||||||||||||||||
Weighted | Average | Aggregate | ||||||||||||||
Average | Remaining | Intrinsic | ||||||||||||||
Exercise | Contractual | Value | ||||||||||||||
Shares | Price | Term | (In thousands) | |||||||||||||
Outstanding at January 1, 2006 | 746,952 | $ | 28.44 | 7 years | ||||||||||||
Granted (weighted average grant date fair value $7.66 per share) | 643,500 | $ | 28.44 | |||||||||||||
Exercised | — | |||||||||||||||
Forfeited | (80,000 | ) | $ | 28.44 | ||||||||||||
Outstanding at December 31, 2006 | 1,310,452 | $ | 28.44 | 5.8 years | $ | 16,091 | ||||||||||
Granted (weighted average grant date fair value $23.46 per share) | 965,000 | $ | 26.95 | |||||||||||||
Exercised | (208,750 | ) | $ | 27.82 | $ | 2,930 | ||||||||||
Forfeited | (15,000 | ) | $ | 27.57 | ||||||||||||
Outstanding at December 31, 2007 | 2,051,702 | $ | 27.81 | 4.2 years | $ | 13,216 | ||||||||||
Forfeited | (17,500 | ) | $ | 27.69 | ||||||||||||
Outstanding at December 31, 2008 | 2,034,202 | $ | 27.81 | 3.2 years | $ | 0.0 | ||||||||||
Vested and expected to vest at December 31, 2008 | 2,031,936 | $ | 27.81 | 3.2 years | $ | 0.0 | ||||||||||
Exercisable at December 31, 2008 | 1,806,077 | $ | 27.85 | 3.3 years | $ | 0.0 | ||||||||||
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Weighted Average | ||||||||
Grant- Date | ||||||||
Shares | Fair Value | |||||||
Non-vested restricted stock at January 1, 2007 | — | — | ||||||
Granted | 206,700 | $ | 46.65 | |||||
Vested (intrinsic value of $3.0 million) | (62,777 | ) | $ | 46.65 | ||||
Forfeited | (1,919 | ) | $ | 46.65 | ||||
Non-vested restricted stock at December 31, 2007 | 142,004 | $ | 46.65 | |||||
Granted | 15,000 | $ | 19.70 | |||||
Vested (intrinsic value of $1.1 million) | (57,463 | ) | $ | 46.65 | ||||
Forfeited | (3,836 | ) | $ | 46.65 | ||||
Non-vested restricted stock at December 31, 2008 | 95,705 | $ | 42.43 | |||||
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11. | Earnings (Loss) Per Share |
12. | Pensions and Other Employee Benefits |
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Pension Benefits | ||||||||||||||||
Year Ended | Other Benefits | |||||||||||||||
December 31, | Year Ended December 31, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Reconciliation of benefit obligation | ||||||||||||||||
Obligation at beginning of period | $ | 367,870 | $ | 371,883 | $ | 73,788 | $ | 85,652 | ||||||||
Service cost | 9,214 | 10,145 | 1,056 | 1,607 | ||||||||||||
Interest cost | 23,367 | 22,455 | 4,108 | 4,995 | ||||||||||||
Participant contributions | 1,385 | 1,612 | 1,792 | 1,827 | ||||||||||||
Amendments | — | — | — | (2,815 | ) | |||||||||||
Actuarial loss (gain) | 2,146 | (15,492 | ) | (9,393 | ) | (3,125 | ) | |||||||||
Benefit payments | (22,630 | ) | (21,382 | ) | (4,764 | ) | (5,008 | ) | ||||||||
Curtailment gain | (433 | ) | (1,351 | ) | — | (1,169 | ) | |||||||||
Transfer of liability due to Telesat Canada transaction | — | — | — | (8,176 | ) | |||||||||||
Obligation at December 31, | $ | 380,919 | $ | 367,870 | $ | 66,587 | $ | 73,788 | ||||||||
Reconciliation of fair value of plan assets | ||||||||||||||||
Fair value of plan assets at beginning of period | $ | 284,283 | $ | 284,275 | $ | 955 | $ | 866 | ||||||||
Actual return on plan assets | (80,059 | ) | 18,936 | 27 | 89 | |||||||||||
Employer contributions | 27,904 | — | 2,732 | 3,181 | ||||||||||||
Participant contributions | 1,385 | 1,612 | 1,792 | 1,827 | ||||||||||||
Benefit payments | (21,531 | ) | (20,540 | ) | (4,764 | ) | (5,008 | ) | ||||||||
Fair value of plan assets at December 31, | $ | 211,982 | $ | 284,283 | $ | 742 | $ | 955 | ||||||||
Funded status at end of period | $ | (168,937 | ) | $ | (83,587 | ) | $ | (65,845 | ) | $ | (72,833 | ) | ||||
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Pension Benefits | Other Benefits | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Actuarial (loss) gain | $ | (80,213 | ) | $ | 26,477 | $ | 7,216 | $ | (2,103 | ) | ||||||
Amendments-prior service credit | 28,111 | 30,829 | 2,966 | 3,446 | ||||||||||||
$ | (52,102 | ) | $ | 57,306 | $ | 10,182 | $ | 1,343 | ||||||||
Pension Benefits | Other Benefits | |||||||
Actuarial (loss) gain during the period | $ | (106,672 | ) | $ | 9,349 | |||
Amortization of actuarial gain | (18 | ) | (30 | ) | ||||
Amortization of prior service credit | (2,718 | ) | (480 | ) | ||||
Total recognized in other comprehensive income | $ | (109,408 | ) | $ | 8,839 | |||
Pension Benefits | Other Benefits | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Current Liabilities | $ | 1,070 | $ | 892 | $ | 3,051 | $ | 3,187 | ||||||||
Long-Term Liabilities | 167,867 | 82,695 | 62,794 | 69,646 | ||||||||||||
$ | 168,937 | $ | 83,587 | $ | 65,845 | $ | 72,833 | |||||||||
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Pension Benefits | Other Benefits | |||||||||||||||||||||||
For the Year Ended December 31, | For the Year Ended December 31, | |||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||||||
Service cost | $ | 9,214 | $ | 10,145 | $ | 10,926 | $ | 1,056 | $ | 1,607 | $ | 1,482 | ||||||||||||
Interest cost | 23,367 | 22,455 | 21,835 | 4,108 | 4,995 | 4,834 | ||||||||||||||||||
Expected return on plan assets | (24,469 | ) | (23,768 | ) | (22,229 | ) | (72 | ) | (36 | ) | (52 | ) | ||||||||||||
Amortization of prior service credit | (2,718 | ) | (2,784 | ) | (1,399 | ) | (480 | ) | (553 | ) | (239 | ) | ||||||||||||
Amortization of net actuarial loss (gain) | (18 | ) | (59 | ) | — | (30 | ) | 111 | 127 | |||||||||||||||
Curtailment gain | (433 | ) | (2,345 | ) | — | — | (1,862 | ) | — | |||||||||||||||
Net periodic cost | $ | 4,943 | $ | 3,644 | $ | 9,133 | $ | 4,582 | $ | 4,262 | $ | 6,152 | ||||||||||||
�� |
For the Year Ended December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||
Discount rate | 6.50% | 6.00%/6.50% | 5.75 | % | ||||||
Expected return on plan assets | 8.50% | 8.50% | 9.00 | % | ||||||
Rate of compensation increase | 4.25% | 4.25% | 4.25 | % |
December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Discount rate | 6.50 | % | 6.50 | % | 6.00 | % | ||||||
Rate of compensation increase | 4.25 | % | 4.25 | % | 4.25 | % |
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December 31, | ||||||||
2008 | 2007 | |||||||
Equity investments | 51 | % | 54 | % | ||||
Fixed income investments | 49 | % | 46 | % | ||||
100 | % | 100 | % | |||||
1% Increase | 1% Decrease | |||||||
Effect on total of service and interest cost components of net periodic postretirement health care benefit cost | $ | 421 | $ | (342 | ) | |||
Effect on the health care component of the accumulated postretirement benefit obligation | $ | 5,300 | $ | (4,408 | ) |
Other Benefits | ||||||||||||
Gross | Medicare | |||||||||||
Pension | Benefit | Subsidy | ||||||||||
Benefits | Payments | Receipts | ||||||||||
2009 | $ | 24,640 | $ | 4,209 | $ | 295 | ||||||
2010 | 25,385 | 4,496 | 324 | |||||||||
2011 | 26,053 | 4,771 | 357 | |||||||||
2012 | 26,170 | 5,017 | 393 | |||||||||
2013 | 26,508 | 5,219 | 426 | |||||||||
2014 to 2018 | 143,117 | 28,685 | 2,671 |
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13. | Financial Instruments, Derivative Instruments and Hedging |
Foreign Currency | U.S. $ | |||||
Future revenues — Japanese Yen | ¥ 64,874 | $ | 718 | |||
Future expenditures — Japanese Yen | ¥ 3,491,204 | $ | 38,637 | |||
Contracts-in-process, unbilled receivables — Japanese Yen | ¥ 10,374 | $ | 115 | |||
Future expenditures — EUROs | € 6,270 | $ | 8,839 |
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To Sell | ||||||||||||
At | At | |||||||||||
Euro | Contract | Market | ||||||||||
Maturity | Amount | Rate | Rate | |||||||||
2009 | € | 65,540 | $ | 99,793 | $ | 91,376 | ||||||
2010 | 19,210 | 29,388 | 26,734 | |||||||||
2011 | 23,493 | 35,663 | 32,608 | |||||||||
€ | 108,243 | $ | 164,844 | $ | 150,718 | |||||||
To Buy | ||||||||||||
At | At | |||||||||||
Euro | Contract | Market | ||||||||||
Maturity | Amount | Rate | Rate | |||||||||
2009 | € | 4,520 | $ | 6,294 | $ | 6,315 |
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14. | Commitments and Contingencies |
Balance of deferred amounts at January 1, 2006 | $ | 41,692 | ||
Accruals for deferred amounts issued during the period | 4,800 | |||
Accruals relating to pre-existing contracts (including changes in estimates) | 7,380 | |||
Balance of deferred amounts at December 31, 2006 | 53,872 | |||
Warranty costs incurred including payments | (10,790 | ) | ||
Accruals relating to pre-existing contracts (including changes in estimates) | (8,056 | ) | ||
Balance of deferred amounts at December 31, 2007 | 35,026 | |||
Warranty costs incurred including payments | (956 | ) | ||
Accruals relating to pre-existing contracts (including changes in estimates) | 2,185 | |||
Balance of deferred amounts at December 31, 2008 | $ | 36,255 | ||
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Gross | Sublease | |||||||||||
Rent | Income | Net Rent | ||||||||||
Year ended December 31, 2008 | $ | 12,154 | $ | (6 | ) | $ | 12,148 | |||||
Year ended December 31, 2007 | $ | 26,302 | $ | (76 | ) | $ | 26,226 | |||||
Year ended December 31, 2006 | $ | 27,317 | $ | (20 | ) | $ | 27,297 |
2009 | $ | 9,723 | ||
2010 | 8,967 | |||
2011 | 6,328 | |||
2012 | 3,782 | |||
2013 | 2,122 | |||
Thereafter | 7,089 | |||
$ | 38,011 | |||
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15. | Segments |
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(in thousands)
Satellite | Satellite | |||||||||||||||
Manufacturing | Services(1) | Corporate(2) | Total | |||||||||||||
Revenues and Adjusted EBITDA: | ||||||||||||||||
Revenues | $ | 785,534 | $ | 685,187 | $ | 1,470,721 | ||||||||||
Intersegment revenues(3) | 95,913 | — | 95,913 | |||||||||||||
Operating segment revenues | $ | 881,447 | 685,187 | 1,566,634 | ||||||||||||
Intercompany eliminations(4) | (12,049 | ) | ||||||||||||||
Affiliate eliminations(1) | (685,187 | ) | ||||||||||||||
Revenues as reported | $ | 869,398 | ||||||||||||||
Segment Adjusted EBITDA before eliminations(5)(6) | $ | 45,055 | $ | 436,514 | $ | (14,875 | ) | $ | 466,694 | |||||||
Intercompany eliminations(4) | (1,569 | ) | ||||||||||||||
Affiliate eliminations(1) | (427,176 | ) | ||||||||||||||
Adjusted EBITDA | 37,949 | |||||||||||||||
Depreciation, amortization and stock-based compensation | (43,986 | ) | ||||||||||||||
Impairment of goodwill(7) | (187,940 | ) | ||||||||||||||
Operating loss | (193,977 | ) | ||||||||||||||
Interest and investment income | 11,857 | |||||||||||||||
Interest expense | (2,268 | ) | ||||||||||||||
Gain on litigation, net | 38,823 | |||||||||||||||
Impairment of available for sale securities | (5,823 | ) | ||||||||||||||
Other expense | (135 | ) | ||||||||||||||
Income tax provision | (45,744 | ) | ||||||||||||||
Equity loss in affiliates | $ | (479,579 | ) | $ | (16,070 | ) | (495,649 | ) | ||||||||
Net loss | $ | (692,916 | ) | |||||||||||||
Other Data: | ||||||||||||||||
Segment depreciation, amortization and stock-based compensation | $ | 38,646 | $ | 220,843 | $ | 5,342 | $ | 264,831 | ||||||||
Affiliate eliminations(1) | — | (220,843 | ) | — | (220,843 | ) | ||||||||||
Depreciation, amortization and stock-based compensation as reported | $ | 38,646 | $ | — | $ | 5,342 | $ | 43,988 | ||||||||
Segment capital expenditures(7) | $ | 53,883 | $ | 255,506 | $ | 10,676 | $ | 320,065 | ||||||||
Affiliate eliminations(1) | — | (255,506 | ) | — | (255,506 | ) | ||||||||||
Capital expenditures as reported | $ | 53,883 | $ | — | $ | 10,676 | $ | 64,559 | ||||||||
Segment total assets | $ | 799,476 | $ | 4,273,162 | $ | 196,391 | $ | 5,269,029 | ||||||||
Affiliate eliminations(1) | — | (4,273,162 | ) | — | (4,273,162 | ) | ||||||||||
Total assets as reported(7) | $ | 799,476 | $ | — | $ | 196,391 | $ | 995,867 | ||||||||
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(in thousands)
Satellite | Satellite | |||||||||||||||
Manufacturing | Services(1) | Corporate(2) | Total | |||||||||||||
Revenues and Adjusted EBITDA: | ||||||||||||||||
Revenues | $ | 739,815 | $ | 238,858 | $ | 978,673 | ||||||||||
Intersegment revenues(3) | 74,500 | 2,298 | 76,798 | |||||||||||||
Operating segment revenues | $ | 814,315 | $ | 241,156 | 1,055,471 | |||||||||||
Intercompany eliminations(4) | (55,250 | ) | ||||||||||||||
Affiliate eliminations(1) | (117,767 | ) | ||||||||||||||
Revenues as reported | $ | 882,454 | ||||||||||||||
Segment Adjusted EBITDA before eliminations(5)(6) | $ | 34,479 | $ | 118,385 | $ | (37,935 | ) | $ | 114,929 | |||||||
Intercompany eliminations(4) | (6,075 | ) | ||||||||||||||
Affiliate eliminations(1) | (65,283 | ) | ||||||||||||||
Adjusted EBITDA | 43,571 | |||||||||||||||
Depreciation, amortization and stock-based compensation | (103,257 | ) | ||||||||||||||
Gain on the contribution of Loral Skynet to Telesat Canada | 104,942 | |||||||||||||||
Operating income | 45,256 | |||||||||||||||
Interest and investment income | 39,279 | |||||||||||||||
Interest expense | (2,312 | ) | ||||||||||||||
Gain on foreign exchange contracts | 89,364 | |||||||||||||||
Loss on extinguishment of debt | (16,155 | ) | ||||||||||||||
Other expense | 2,354 | |||||||||||||||
Income tax provision | (83,457 | ) | ||||||||||||||
Equity loss in affiliates | $ | (1,792 | ) | $ | (19,638 | ) | (21,430 | ) | ||||||||
Minority interest | (23,240 | ) | ||||||||||||||
Income from continuing operations | $ | 29,659 | ||||||||||||||
Other Data: | ||||||||||||||||
Segment depreciation, amortization andstock-based compensation | $ | 36,282 | $ | 85,905 | $ | 22,270 | $ | 144,457 | ||||||||
Affiliate eliminations(1) | — | (41,200 | ) | — | (41,200 | ) | ||||||||||
Depreciation, amortization and stock-based compensation as reported | $ | 36,282 | $ | 44,705 | $ | 22,270 | $ | 103,257 | ||||||||
Segment capital expenditures(7) | $ | 37,477 | $ | 88,647 | $ | 39 | $ | 126,163 | ||||||||
Affiliate eliminations(1) | — | (30,400 | ) | — | (30,400 | ) | ||||||||||
Capital expenditures as reported | $ | 37,477 | $ | 58,247 | $ | 39 | $ | 95,763 | ||||||||
Segment total assets | $ | 963,388 | $ | 6,221,408 | $ | 128,190 | $ | 7,312,986 | ||||||||
Affiliate eliminations(1) | — | (5,610,047 | ) | — | (5,610,047 | ) | ||||||||||
Total assets as reported(7) | $ | 963,388 | $ | 611,361 | $ | 128,190 | $ | 1,702,939 | ||||||||
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(in thousands)
Satellite | Satellite | |||||||||||||||
Manufacturing | Services | Corporate(2) | Total | |||||||||||||
Revenues and Adjusted EBITDA: | ||||||||||||||||
Revenues | $ | 636,632 | $ | 160,701 | $ | 797,333 | ||||||||||
Intersegment revenues | 59,894 | 3,085 | 62,979 | |||||||||||||
Operating segment revenues | $ | 696,526 | $ | 163,786 | 860,312 | |||||||||||
Intercompany eliminations(4) | (62,979 | ) | ||||||||||||||
Revenues as reported | $ | 797,333 | ||||||||||||||
Segment Adjusted EBITDA before eliminations(5)(6) | $ | 65,884 | $ | 67,956 | $ | (26,784 | ) | $ | 107,056 | |||||||
Intercompany eliminations(4) | (5,941 | ) | ||||||||||||||
Adjusted EBITDA | 101,115 | |||||||||||||||
Depreciation, amortization and stock based compensation | (71,297 | ) | ||||||||||||||
Operating income from continuing operations | 29,818 | |||||||||||||||
Interest and investment income | 31,526 | |||||||||||||||
Interest expense | (23,449 | ) | ||||||||||||||
Loss on foreign exchange contracts | (5,750 | ) | ||||||||||||||
Other expense | (2,028 | ) | ||||||||||||||
Income tax provision | (20,880 | ) | ||||||||||||||
Equity loss in affiliates | (7,163 | ) | ||||||||||||||
Minority interest | (24,794 | ) | ||||||||||||||
Loss from continuing operations | $ | (22,720 | ) | |||||||||||||
Other Data: | ||||||||||||||||
Depreciation, amortization and stock-based compensation as reported | $ | 23,284 | $ | 45,881 | $ | 2,132 | $ | 71,297 | ||||||||
Capital Expenditures as reported | $ | 18,411 | $ | 63,617 | $ | 129 | $ | 82,157 | ||||||||
Total assets as reported(7) | $ | 944,630 | $ | 750,412 | $ | 34,869 | $ | 1,729,911 | ||||||||
(1) | Satellite Services for 2008 represents Telesat Canada. Satellite Services for 2007 include Loral Skynet for the period January 1, 2007 to October 30, 2007 and Telesat Canada for the period October 31, 2007 to December 31, 2007. Affiliate eliminations represent the elimination of amounts attributable to Telesat Canada whose results are reported in our consolidated statements of operations as equity in net losses of affiliates and in our consolidated balance sheet as investment in affiliates. | |
(2) | Includes corporate expenses incurred in support of our operations. Corporate for 2008 and 2007 includes our equity investments in XTAR and Globalstar service providers. | |
(3) | Intersegment revenues includes $84.0 million and $22.0 million for the years ended December 31, 2008 and 2007, respectively, of revenue from affiliates. | |
(4) | Represents the elimination of intercompany sales and intercompany Adjusted EBITDA, primarily for satellites under construction by SS/L for Loral and its wholly owned subsidiaries and for satellite services leasing transponder capacity at SS/L. | |
(5) | Satellite manufacturing includes (in thousands): |
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Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Adjusted EBITDA before specific identified charges | $ | 44,684 | $ | 27,167 | $ | 57,139 | ||||||
Transponders rights provided to SS/L in the Satmex settlement agreement | — | — | 18,605 | |||||||||
Accrued warranty obligations | 371 | 6,769 | (8,182 | ) | ||||||||
Provisions for inventory obsolescence | — | 543 | (1,678 | ) | ||||||||
Satellite manufacturing segment Adjusted EBITDA before eliminations | $ | 45,055 | $ | 34,479 | $ | 65,884 | ||||||
(6) | Satellite Services Revenue and EBITDA include $14.9 million resulting from receipt of a customer termination payment for the year ended December 31, 2006. | |
(7) | Amounts are presented after the elimination of intercompany profit and include goodwill of $227 million and $306 million for Satellite Manufacturing, as of December 31, 2007 and 2006, respectively. During 2008, we determined that the implied fair value of SS/L goodwill had decreased below its carrying value, and we recorded an impairment charge for the entire goodwill balance of $187.9 million to reflect this impairment. In addition, total assets as reported excludes $2.0 billion and $2.5 billion of satellite services goodwill related to Telesat Canada as of December 31, 2008 and 2007, respectively. |
For the Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
United States | $ | 612,282 | $ | 702,605 | $ | 691,986 | ||||||
People’s Republic of China (including Hong Kong) | 13,236 | 47,591 | 26,607 | |||||||||
United Kingdom | 68,956 | 45,596 | 11,943 | |||||||||
Canada | 83,767 | 43,552 | 252 | |||||||||
Luxembourg | 11,398 | — | — | |||||||||
Spain | 25,506 | 385 | 5,682 | |||||||||
The Netherlands | 50,110 | 6,849 | 8,941 | |||||||||
Other | 4,143 | 35,876 | 51,922 | |||||||||
$ | 869,398 | $ | 882,454 | $ | 797,333 | |||||||
16. | Related Party Transactions |
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December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Loral Series-1 Preferred Stock | ||||||||||||
Dividends paid in the form of additional shares | ||||||||||||
— Number of shares | 80,423 | 47,762 | — | |||||||||
— Amount | $ | 24,248 | $ | 14,400 | $ | — | ||||||
Loral Skynet Preferred Stock | ||||||||||||
Dividends paid in cash | $ | — | $ | 4,513 | $ | 500 | ||||||
Dividends paid in the form of additional shares | ||||||||||||
— Number of shares | — | 44,539 | 27,011 | |||||||||
— Amount | $ | — | $ | 8,908 | $ | 5,400 | ||||||
Loral Skynet Notes | ||||||||||||
Interest payments paid in cash | $ | — | $ | 8,967 | $ | 5,100 | ||||||
Redemption premium paid in cash | $ | — | $ | 5,624 | $ | — | ||||||
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17. | Selected Quarterly Financial Information (unaudited, in thousands, except per share amounts) |
Quarter Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
Year ended December 31, 2008 | ||||||||||||||||
Revenues | $ | 218,537 | $ | 208,061 | $ | 212,519 | $ | 230,281 | ||||||||
Operating income (loss), | (10,810 | ) | 4,536 | (5,795 | ) | (181,908 | ) | |||||||||
Income (loss) before income taxes, equity in net income (losses) of affiliates and minority interest | (4,904 | ) | 60,755 | (5,433 | ) | (201,941 | ) | |||||||||
Equity in net income (losses) of affiliates | (64,537 | ) | 2,838 | (39,353 | ) | (394,597 | ) | |||||||||
Net (loss) income | (71,217 | ) | 51,950 | (44,225 | ) | (629,424 | ) | |||||||||
Basic and diluted income (loss) per share(1): | ||||||||||||||||
Basic income (loss) per share | (3.83 | ) | 2.27 | (2.50 | ) | (31.13 | ) | |||||||||
Diluted income (loss) per share | (3.83 | ) | 2.16 | (2.50 | ) | (31.13 | ) |
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Quarter Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
Year ended December 31, 2007 | ||||||||||||||||
Revenues | $ | 220,532 | $ | 226,000 | $ | 235,640 | $ | 200,282 | ||||||||
Operating income (loss), | (11,798 | ) | (15,121 | ) | 66 | 72,109 | ||||||||||
Income (loss) before income taxes, equity in net losses of affiliates and minority interest | (4,011 | ) | 54,990 | 58,441 | 48,366 | |||||||||||
Minority interest | (6,986 | ) | (6,487 | ) | (7,078 | ) | (2,689 | ) | ||||||||
Net income (loss) | (16,823 | ) | 20,627 | 25,929 | (74 | ) | ||||||||||
Basic and diluted loss per share(1): | ||||||||||||||||
Basic income (loss) per share | (2.16 | ) | 0.70 | 0.99 | (0.30 | ) | ||||||||||
Diluted income (loss) per share | (2.16 | ) | 0.67 | 0.96 | (0.30 | ) |
(1) | The quarterly earnings per share information is computed separately for each period. Therefore, the sum of such quarterly per share amounts may differ from the total for the year. |
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VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 2008, 2007 and 2006
(in thousands)
Additions | ||||||||||||||||||||
Balance at | Charged to | Charged to | Deductions | Balance at | ||||||||||||||||
Beginning | Costs and | Other | From | End of | ||||||||||||||||
Description | of Period | Expenses | Accounts(1) | Reserves(2) | Period | |||||||||||||||
Year ended 2006 | ||||||||||||||||||||
Allowance for billed receivables | $ | 5,462 | $ | (307 | ) | $ | 1 | $ | (3,532 | ) | $ | 1,624 | ||||||||
Inventory allowance | $ | 33,742 | $ | 1,678 | $ | — | $ | (5,822 | ) | $ | 29,598 | |||||||||
Deferred tax valuation allowance | $ | 337,346 | $ | — | $ | 3,905 | $ | (36,367 | ) | $ | 304,884 | |||||||||
Year ended 2007 | ||||||||||||||||||||
Allowance for billed receivables | $ | 1,624 | $ | (397 | ) | $ | 20 | $ | (1,024 | ) | $ | 223 | ||||||||
Inventory allowance | $ | 29,598 | $ | (543 | ) | $ | — | $ | (609 | ) | $ | 28,446 | ||||||||
Deferred tax valuation allowance | $ | 304,884 | $ | 16,287 | $ | (34,749 | ) | $ | (45,194 | ) | $ | 241,228 | ||||||||
Year ended 2008 | ||||||||||||||||||||
Allowance for billed receivables | $ | 223 | $ | 700 | $ | — | $ | — | $ | 923 | ||||||||||
Inventory allowance | $ | 28,446 | $ | — | $ | — | $ | (1,246 | ) | $ | 27,200 | |||||||||
Deferred tax valuation allowance | $ | 241,228 | $ | 202,510 | $ | 82,611 | $ | (38,587 | ) | $ | 487,762 | |||||||||
(1) | The allowance for long-term receivables is recorded as a reduction to revenues. Changes in the deferred tax valuation allowance which have been charged to other accounts have been recorded in accumulated other comprehensive income, goodwill and other deferred tax assets. | |
(2) | Deductions from reserves reflect write-offs of uncollectible billed receivables, disposals of inventory and reversal of excess deferred tax valuation allowance recorded as a reduction to goodwill. |
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Successor Entity | Predecessor Entity | ||||||||||||||||||||
For the Period | For the Period | ||||||||||||||||||||
October 31 | January 1 | ||||||||||||||||||||
Year Ended | to | to | Year Ended | ||||||||||||||||||
December 31, | December 31, | October 30, | December 31, | ||||||||||||||||||
Notes | 2008 | 2007 | 2007 | 2006 | |||||||||||||||||
Operating revenues | |||||||||||||||||||||
Service revenues | 680,791 | 103,509 | 384,428 | 435,123 | |||||||||||||||||
Equipment sales revenues | 30,584 | 7,907 | 40,760 | 41,280 | |||||||||||||||||
Sales-type lease revenues | — | — | 32,599 | 2,562 | |||||||||||||||||
Operating revenues | (4 | ) | 711,375 | 111,416 | 457,787 | 478,965 | |||||||||||||||
Amortization | 235,640 | 40,046 | 105,788 | 120,712 | |||||||||||||||||
Operations and administration | 247,550 | 43,276 | 144,307 | 183,388 | |||||||||||||||||
Cost of equipment sales | 24,368 | 6,485 | 34,723 | 33,625 | |||||||||||||||||
Cost of sales-type lease | — | — | 15,519 | 953 | |||||||||||||||||
Impairment loss on long-lived assets | (11 | ) | 2,373 | — | 2,116 | — | |||||||||||||||
Impairment loss on intangible assets | (12 | ) | 483,000 | — | — | — | |||||||||||||||
Total operating expenses | 992,931 | 89,807 | 302,453 | 338,678 | |||||||||||||||||
Earnings from operations | (281,556 | ) | 21,609 | 155,334 | 140,287 | ||||||||||||||||
Interest expense | (5 | ) | (257,641 | ) | (43,861 | ) | (8,548 | ) | (12,459 | ) | |||||||||||
Other expense | (6 | ) | (448,083 | ) | (43,969 | ) | (7,967 | ) | (2,155 | ) | |||||||||||
(Loss) earnings before income taxes | (987,280 | ) | (66,221 | ) | 138,819 | 125,673 | |||||||||||||||
Income tax recovery (expense) | (7 | ) | 164,879 | 62,170 | (57,077 | ) | (21,688 | ) | |||||||||||||
Net (loss) earnings | (822,401 | ) | (4,051 | ) | 81,742 | 103,985 | |||||||||||||||
Dividends on preferred shares | — | — | — | (1,487 | ) | ||||||||||||||||
Net (loss) earnings applicable to common shares | (822,401 | ) | (4,051 | ) | 81,742 | 102,498 | |||||||||||||||
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Successor Entity | Predecessor Entity | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
October 31 | January 1 | ||||||||||||||||
Year Ended | to | to | Year Ended | ||||||||||||||
December 31, | December 31, | October 30, | December 31, | ||||||||||||||
2008 | 2007 | 2007 | 2006 | ||||||||||||||
Net (loss) earnings | (822,401 | ) | (4,051 | ) | 81,742 | 103,985 | |||||||||||
Other comprehensive (loss) income: | |||||||||||||||||
Unrealized gain (loss) on translation of financial statements of self sustaining foreign operations | (5,053 | ) | (665 | ) | 2,542 | (526 | ) | ||||||||||
Related tax | (2,090 | ) | 66 | (827 | ) | 78 | |||||||||||
Loss on derivatives designated as cash flow hedges | — | — | (29,061 | ) | — | ||||||||||||
Related tax | — | — | 9,242 | — | |||||||||||||
Gain on derivatives designated as cash flow hedges in prior periods transferred to net income in the current period | — | — | 8,190 | — | |||||||||||||
Related tax | — | — | (2,605 | ) | — | ||||||||||||
Comprehensive (loss) income | (829,544 | ) | (4,650 | ) | 69,223 | 103,537 | |||||||||||
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Total | ||||||||||||||||||||||||||||||||
(Accumulated | ||||||||||||||||||||||||||||||||
Deficit) | ||||||||||||||||||||||||||||||||
Retained | ||||||||||||||||||||||||||||||||
Earnings | ||||||||||||||||||||||||||||||||
and | ||||||||||||||||||||||||||||||||
(Accumulated | Accumulated | Accumulated | ||||||||||||||||||||||||||||||
Deficit) | Other | Other | Total | |||||||||||||||||||||||||||||
Common | Contributed | Preferred | Retained | Comprehensive | Comprehensive | Shareholders’ | ||||||||||||||||||||||||||
Notes | Shares | Surplus | Shares | Earnings | (Loss) Income | (Loss) Income | Equity | |||||||||||||||||||||||||
Predecessor entity | ||||||||||||||||||||||||||||||||
Balance at January 1, 2006 | 341,116 | 5,152 | 50,000 | 283,865 | (1,835 | ) | 282,030 | 678,298 | ||||||||||||||||||||||||
Acquisition of 3652041 Canada Inc. | (3 | ) | — | (21,200 | ) | — | — | — | — | (21,200 | ) | |||||||||||||||||||||
Sale of investment in TMI Telecommunications | (3 | ) | — | 200,291 | — | — | — | — | 200,291 | |||||||||||||||||||||||
Stock-based compensation | — | 173 | — | — | — | — | 173 | |||||||||||||||||||||||||
Net earnings | — | — | — | 103,985 | — | 103,985 | 103,985 | |||||||||||||||||||||||||
Dividends declared on preferred shares | — | — | — | (1,487 | ) | — | (1,487 | ) | (1,487 | ) | ||||||||||||||||||||||
Other | — | — | — | 35 | — | 35 | 35 | |||||||||||||||||||||||||
Change in cumulative translation adjustment | — | — | — | — | (448 | ) | (448 | ) | (448 | ) | ||||||||||||||||||||||
Redemption of preferred shares | — | — | (50,000 | ) | — | — | — | (50,000 | ) | |||||||||||||||||||||||
Balance at December 31, 2006 | 341,116 | 184,416 | — | 386,398 | (2,283 | ) | 384,115 | 909,647 | ||||||||||||||||||||||||
Adjustment for changes in accounting policies | — | — | — | (401 | ) | 1,239 | 838 | 838 | ||||||||||||||||||||||||
Stock compensation | — | 617 | — | — | — | — | 617 | |||||||||||||||||||||||||
Net earnings | — | — | — | 81,742 | — | 81,742 | 81,742 | |||||||||||||||||||||||||
Reorganization | (1 | ) | — | (185,033 | ) | — | (579,807 | ) | — | (579,807 | ) | (764,840 | ) | |||||||||||||||||||
Unrealized gains on translation of financial statements of self sustaining foreign operations | — | — | — | — | 1,715 | 1,715 | 1,715 | |||||||||||||||||||||||||
Gains and losses on derivatives designated as cash flow hedges | — | — | — | — | (19,819 | ) | (19,819 | ) | (19,819 | ) | ||||||||||||||||||||||
Gains and losses on derivatives designated as cash flow hedges in prior periods transferred to net income in the current period | — | — | — | — | 5,585 | 5,585 | 5,585 | |||||||||||||||||||||||||
Balance at October 30, 2007 (prior to acquisition transactions) | 341,116 | — | — | (112,068 | ) | (13,563 | ) | (125,631 | ) | 215,485 | ||||||||||||||||||||||
Telesat Holdings Inc. Acquisition Transactions and adjustments | (341,116 | ) | — | — | 112,068 | 13,563 | 125,631 | (215,485 | ) | |||||||||||||||||||||||
Successor entity | ||||||||||||||||||||||||||||||||
Balance at October 31, 2007 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Common shares issued as part of the sale transaction | (3 | ), (16) | 756,414 | — | — | — | — | — | 756,414 | |||||||||||||||||||||||
Preferred shares issued as part of the sale transaction | (3 | ), (16) | — | — | 541,764 | — | — | — | 541,764 | |||||||||||||||||||||||
Net loss | — | — | — | (4,051 | ) | — | (4,051 | ) | (4,051 | ) | ||||||||||||||||||||||
Unrealized losses on translation of financial statements of self sustaining foreign operations | — | — | — | — | (599 | ) | (599 | ) | (599 | ) | ||||||||||||||||||||||
Balance at December 31, 2007 | 756,414 | — | 541,764 | (4,051 | ) | (599 | ) | (4,650 | ) | 1,293,528 | ||||||||||||||||||||||
Net loss | — | — | — | (822,401 | ) | — | (822,401 | ) | (822,401 | ) | ||||||||||||||||||||||
Unrealized losses on translation of financial statements of self sustaining foreign operations | — | — | — | — | (7,143 | ) | (7,143 | ) | (7,143 | ) | ||||||||||||||||||||||
Stock-based compensation | — | 5,448 | — | — | — | — | 5,448 | |||||||||||||||||||||||||
Balance at December 31, 2008 | 756,414 | 5,448 | 541,764 | (826,452 | ) | (7,742 | ) | (834,194 | ) | 469,432 | ||||||||||||||||||||||
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December 31, | December 31, | |||||||||
Notes | 2008 | 2007 | ||||||||
ASSETS | ||||||||||
Current assets | ||||||||||
Cash and cash equivalents | 98,539 | 42,203 | ||||||||
Accounts receivable | (8) | 61,933 | 53,875 | |||||||
Current future tax asset | (7) | 2,581 | 2,594 | |||||||
Assets held for sale | (9) | — | 4,037 | |||||||
Other current assets | (10) | 49,187 | 57,777 | |||||||
Total current assets | 212,240 | 160,486 | ||||||||
Satellites, property and other equipment, net | (4), (11) | 1,883,576 | 1,790,633 | |||||||
Other long-term assets | (10) | 42,303 | 27,368 | |||||||
Intangible assets, net | (12) | 582,035 | 1,120,338 | |||||||
Goodwill | (12) | 2,446,603 | 2,446,603 | |||||||
Total assets | 5,166,757 | 5,545,428 | ||||||||
LIABILITIES | ||||||||||
Current liabilities | ||||||||||
Accounts payable and accrued liabilities | 48,792 | 61,599 | ||||||||
Other current liabilities | (13) | 138,095 | 152,375 | |||||||
Debt due within one year | (14) | 23,272 | 18,419 | |||||||
Total current liabilities | 210,159 | 232,393 | ||||||||
Debt financing | (14) | 3,513,223 | 2,775,944 | |||||||
Future tax liability | (7) | 266,372 | 439,641 | |||||||
Other long-term liabilities | (13) | 566,136 | 662,487 | |||||||
Senior preferred shares | (15) | 141,435 | 141,435 | |||||||
Total liabilities | 4,697,325 | 4,251,900 | ||||||||
Shareholders’ equity | ||||||||||
Common shares (74,252,460 common shares issued and outstanding) | (16) | 756,414 | 756,414 | |||||||
Preferred shares | (16) | 541,764 | 541,764 | |||||||
1,298,178 | 1,298,178 | |||||||||
Accumulated deficit | (826,452 | ) | (4,051 | ) | ||||||
Accumulated other comprehensive loss | (7,742 | ) | (599 | ) | ||||||
(834,194 | ) | (4,650 | ) | |||||||
Contributed surplus | (20) | 5,448 | — | |||||||
Total shareholders’ equity | 469,432 | 1,293,528 | ||||||||
Total liabilities and shareholders’ equity | 5,166,757 | 5,545,428 | ||||||||
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Successor Entity | Predecessor Entity | ||||||||||||||||||
Year Ended | For the Period | For the Period | Year Ended | ||||||||||||||||
December 31, | October 31 to | January 1 to | December 31, | ||||||||||||||||
For The Period Ended | Notes | 2008 | December 31, 2007 | October 30, 2007 | 2006 | ||||||||||||||
Cash flows from operating activities | |||||||||||||||||||
Net (loss) earnings | (822,401 | ) | (4,051 | ) | 81,742 | 103,985 | |||||||||||||
Adjustments to reconcile net earnings (loss) to cash flows from operating activities: | |||||||||||||||||||
Gross profit on sales-type lease | — | (5,881 | ) | (1,609 | ) | ||||||||||||||
Amortization | 235,640 | 40,046 | 105,788 | 120,712 | |||||||||||||||
Future income taxes | (175,951 | ) | (60,653 | ) | 24,292 | 1,205 | |||||||||||||
Unrealized foreign exchange loss | 695,445 | 43,066 | — | — | |||||||||||||||
Unrealized gain on derivatives | (247,931 | ) | — | — | — | ||||||||||||||
Dividends on preferred shares | (5) | 9,855 | 1,695 | — | — | ||||||||||||||
Stock-based compensation expense | (20) | 5,448 | — | — | — | ||||||||||||||
Impairment losses | (11), (12) | 485,373 | — | — | — | ||||||||||||||
Other | (43,867 | ) | (317 | ) | 1,874 | (18,954 | ) | ||||||||||||
Customer prepayments on future satellite services | 88,587 | — | 17,721 | 12,322 | |||||||||||||||
Operating assets and liabilities | (17) | 48,859 | 205,490 | 27,091 | 11,621 | ||||||||||||||
279,057 | 225,276 | 252,627 | 229,282 | ||||||||||||||||
Cash flows used in investing activities | |||||||||||||||||||
Satellite programs | (263,763 | ) | (15,496 | ) | (183,494 | ) | (189,444 | ) | |||||||||||
Property additions | (8,862 | ) | (14,019 | ) | (5,830 | ) | (15,963 | ) | |||||||||||
Maturity of short-term investments | — | — | 2,312 | 48,997 | |||||||||||||||
Business acquisitions | (3) | — | (3,229,194 | ) | (180 | ) | (3,942 | ) | |||||||||||
Proceeds on disposals of assets | 5,120 | 25 | 159 | 178 | |||||||||||||||
Insurance proceeds | 4,006 | — | — | — | |||||||||||||||
(263,499 | ) | (3,258,684 | ) | (187,033 | ) | (160,174 | ) | ||||||||||||
Cash flows from financing activities | |||||||||||||||||||
Debt financing and bank loans | 186,687 | 2,767,716 | 73,000 | 83,862 | |||||||||||||||
Repayment of bank loans and debt financing | (91,560 | ) | (44,899 | ) | (84,090 | ) | (15,026 | ) | |||||||||||
Capitalized debt issuance costs | (19,131 | ) | (83,585 | ) | — | — | |||||||||||||
Note repayment | — | (129,334 | ) | — | (150,000 | ) | |||||||||||||
Success fee payments | — | — | (24,000 | ) | — | ||||||||||||||
Common shares issued | — | 311,124 | — | — | |||||||||||||||
Preferred shares issued (repurchased) | — | 258,833 | — | (50,000 | ) | ||||||||||||||
Capital lease payments | (30,954 | ) | (1,306 | ) | (7,713 | ) | (4,612 | ) | |||||||||||
Satellite performance incentive payments | (3,524 | ) | (4,196 | ) | (2,022 | ) | (6,108 | ) | |||||||||||
Preferred dividends paid | — | — | — | (1,936 | ) | ||||||||||||||
41,518 | 3,074,353 | (44,825 | ) | (143,820 | ) | ||||||||||||||
Effect of changes in exchange rates on cash and cash equivalents | (740 | ) | 1,258 | (1,676 | ) | (132 | ) | ||||||||||||
Increase (decrease) in cash and cash equivalents | 56,336 | 42,203 | 19,093 | (74,844 | ) | ||||||||||||||
Cash and cash equivalents, beginning of period | 42,203 | — | 38,661 | 113,505 | |||||||||||||||
Cash and cash equivalents, end of period | (17) | 98,539 | 42,203 | 57,754 | 38,661 | ||||||||||||||
Supplemental disclosure of cash flow information | |||||||||||||||||||
Interest paid | 286,784 | 18,339 | 18,139 | 30,661 | |||||||||||||||
Income taxes paid | 8,866 | 343 | 21,347 | 34,032 | |||||||||||||||
295,650 | 18,682 | 39,486 | 64,693 | ||||||||||||||||
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1. | Background of the Company and Basis of Presentation |
• | Decrease of $185.0 million to contributed surplus | |
• | Decrease of $579.8 million to retained earnings |
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2. | Significant Accounting Policies |
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Years | ||||
Satellites | 6 to 15 | |||
Transponders under capital lease | 6 to 14 | |||
Earth stations | 5 to 30 | |||
Office buildings and other | 3 to 30 |
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Years | ||||
Revenue backlog | 4 to 17 | |||
Customer relationships | 11 to 21 | |||
Favourable leases | 3 to 4 | |||
Concession right | 15 | |||
Transponder rights | 6 to 14 | |||
Patents | 18 |
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• | the temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the amounts used for tax purposes | |
• | the benefit of unutilized tax losses that will more likely than not be realized and carried forward to future years to reduce income taxes. |
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3. | Business Acquisitions |
Total | ||||
Cash paid (net of cash acquired) | 3,229,194 | |||
Shares issued (note 16) | 869,656 | |||
Transaction costs | 32,692 | |||
Purchase price | 4,131,542 | |||
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Current assets | 101,317 | |||
Satellites, property and other equipment | 1,797,550 | |||
Other long term assets | 19,219 | |||
Intangible assets | 1,128,462 | |||
Assumed debt | (171,620 | ) | ||
Current liabilities, less current portion of debt | (285,016 | ) | ||
Future income tax liability | (497,419 | ) | ||
Other long term liabilities | (407,554 | ) | ||
Total net assets acquired | 1,684,939 | |||
Goodwill | 2,446,603 | |||
Purchase price | 4,131,542 | |||
4. | Segmented Information |
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• | Broadcast — distribution or collection of video and audio signals in the North American and International markets which include television transmit and receive services, occasional use, bundled Digital Video Compression and radio services. | |
• | Enterprise —provision of satellite capacity and ground network services for voice, data, and image transmission and internet access around the world. | |
• | Consulting and other — all consulting services related to space and earth segments, government studies, satellite control services and R&D. |
Successor Entity | Predecessor Entity | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
Year Ended | October 31 to | January 1 to | Year Ended | ||||||||||||||
December 31, | December 31, | October 30, | December 31, | ||||||||||||||
Revenues | 2008 | 2007 | 2007 | 2006 | |||||||||||||
Broadcast | 345,382 | 52,771 | 254,276 | 249,692 | |||||||||||||
Enterprise | 333,834 | 53,758 | 178,888 | 199,617 | |||||||||||||
Consulting and other | 32,159 | 4,887 | 24,623 | 29,656 | |||||||||||||
Total operating revenues | 711,375 | 111,416 | 457,787 | 478,965 | |||||||||||||
Successor Entity | Predecessor Entity | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
Year Ended | October 31 to | January 1 to | Year Ended | ||||||||||||||
December 31, | December 31, | October 30, | December 31, | ||||||||||||||
Revenues | 2008 | 2007 | 2007 | 2006 | |||||||||||||
Revenues — Canada | 357,937 | 60,085 | 315,200 | 329,838 | |||||||||||||
Revenues — United States | 240,505 | 34,352 | 115,993 | 114,609 | |||||||||||||
Revenues — Europe, Middle East & Africa | 47,014 | 6,403 | 6,549 | 8,578 | |||||||||||||
Revenues — Asia, Australia | 33,768 | 5,940 | 5,550 | 2,639 | |||||||||||||
Revenues — Latin America & Caribbean | 32,151 | 4,636 | 14,495 | 23,301 | |||||||||||||
Total operating revenues | 711,375 | 111,416 | 457,787 | 478,965 | |||||||||||||
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December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Satellites, property and other equipment — Canada | 1,431,145 | 1,345,534 | ||||||
Satellites, property and other equipment — United States | 441,809 | 434,596 | ||||||
Satellites, property and other equipment — all others | 10,622 | 10,503 | ||||||
Total satellites, property and other equipment | 1,883,576 | 1,790,633 | ||||||
5. | Interest Expense |
Successor Entity | Predecessor Entity | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
Year Ended | October 31 to | January 1 to | Year Ended | ||||||||||||||
December 31, | December 31, | October 30, | December 31, | ||||||||||||||
2008 | 2007 | 2007 | 2006 | ||||||||||||||
Debt service costs | 286,794 | 47,535 | 18,060 | 24,643 | |||||||||||||
Dividends on senior preferred shares | 9,855 | 1,695 | — | — | |||||||||||||
Capitalized interest | (39,008 | ) | (5,369 | ) | (9,512 | ) | (12,184 | ) | |||||||||
257,641 | 43,861 | 8,548 | 12,459 | ||||||||||||||
6. | Other Expense |
Successor Entity | Predecessor Entity | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
Year Ended | October 31 to | January 1 to | Year Ended | ||||||||||||||
December 31, | December 31, | October 30, | December 31, | ||||||||||||||
2008 | 2007 | 2007 | 2006 | ||||||||||||||
Foreign exchange (loss) | (698,056 | ) | (118,034 | ) | (935 | ) | (581 | ) | |||||||||
Gain (loss) on financial instruments(a) | 251,686 | 75,098 | (6,653 | ) | — | ||||||||||||
Interest income | 1,888 | 301 | 3,130 | 4,504 | |||||||||||||
Performance incentive payments and milestone interest expense | (4,057 | ) | (499 | ) | (4,078 | ) | (6,018 | ) | |||||||||
Other(b) | 456 | (835 | ) | 569 | (60 | ) | |||||||||||
(448,083 | ) | (43,969 | ) | (7,967 | ) | (2,155 | ) | ||||||||||
(a) | The loss on financial instruments at October 30, 2007, predecessor entity, includes a net loss of $10.2 million related to derivatives not designated as hedges, as well as a gain of $3.5 million related to a fair value hedge. | |
(b) | In May 2008, Skynet Satellite Corporation, a wholly-owned subsidiary of Telesat, sold its Hawley facility. Proceeds on this sale were $4.1 million and the resulting loss on the sale of $0.1 million is included in other expense. In February 2008, Infosat sold its security division. Proceeds on this sale were $0.6 million and the resulting gain on the sale of $0.4 million is included in other expense. |
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7. | Income Taxes |
Successor Entity | Predecessor Entity | ||||||||||||||||||||
For the Period | For the Period | ||||||||||||||||||||
Year Ended | October 31 to | January 1 to | Year Ended | ||||||||||||||||||
December 31, | December 31, | October 30, | December 31, | ||||||||||||||||||
Income tax expense (recovery) | 2008 | 2007 | 2007 | 2006 | |||||||||||||||||
Future | (175,951 | ) | (60,653 | ) | 24,292 | 1,205 | |||||||||||||||
Current | 11,072 | (1,517 | ) | 32,785 | 20,483 | ||||||||||||||||
(164,879 | ) | (62,170 | ) | 57,077 | 21,688 | ||||||||||||||||
Successor Entity | Predecessor Entity | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
Year Ended | October 31 to | January 1 to | Year Ended | ||||||||||||||
December 31, | December 31, | October 30, | December 31, | ||||||||||||||
2008 | 2007 | 2007 | 2006 | ||||||||||||||
Statutory income tax rate | 33.0 | % | 35.3 | % | 35.3 | % | 35.4 | % | |||||||||
Permanent differences | (5.9 | )% | (22.1 | )% | (15.4 | )% | 2.0 | % | |||||||||
Adjustment for tax rate changes | (2.5 | )% | 109.1 | % | (2.4 | )% | (14.5 | )% | |||||||||
Impact of acquisition (see note 3) | — | — | 1.8 | % | — | ||||||||||||
Valuation allowance | (6.8 | )% | (38.3 | )% | 6.5 | % | — | ||||||||||
Future taxes related to other comprehensive income | — | — | 4.8 | % | — | ||||||||||||
Charges reflected in equity | — | — | 7.6 | % | — | ||||||||||||
Other | (1.1 | )% | 9.9 | % | 2.9 | % | (5.7 | )% | |||||||||
Effective income tax rate | 16.7 | % | 93.9 | % | 41.1 | % | 17.2 | % | |||||||||
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Future tax assets | ||||||||
Capital assets | 8,904 | 7,912 | ||||||
Intangible assets | 9,482 | 5,353 | ||||||
Unrealized foreign exchange loss | 98,087 | 13,029 | ||||||
Investments | 9,355 | 8,256 | ||||||
Loss carry forwards | 112,386 | 12,610 | ||||||
Derivative assets | — | 4,866 | ||||||
Other | 5,415 | 3,560 | ||||||
Less: valuation allowance | (101,175 | ) | (34,358 | ) | ||||
Total future tax assets | 142,454 | 21,228 | ||||||
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December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Future tax liabilities | ||||||||
Capital assets | (208,115 | ) | (170,276 | ) | ||||
Intangibles | (147,916 | ) | (276,005 | ) | ||||
Derivative liabilities | (47,327 | ) | (7,398 | ) | ||||
Other | (2,887 | ) | (4,596 | ) | ||||
Total future tax liabilities | (406,245 | ) | (458,275 | ) | ||||
Net future income tax liability | (263,791 | ) | (437,047 | ) | ||||
Net future income tax liability is comprised of: | ||||||||
Net future income tax asset — current portion | 2,581 | 2,594 | ||||||
Net future income tax liability — long-term portion | (266,372 | ) | (439,641 | ) | ||||
Net future income tax liability | (263,791 | ) | (437,047 | ) | ||||
8. | Accounts and Notes Receivable |
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Trade receivables — net of allowance for doubtful accounts | 63,723 | 54,114 | ||||||
Less: long-term portion of trade receivables | (1,790 | ) | (239 | ) | ||||
61,933 | 53,875 | |||||||
9. | Assets Held for Sale |
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10. | Other Assets |
December 31, 2008 | December 31, 2007 | |||||||||||||||
Current | Long Term | Current | Long Term | |||||||||||||
Portion | Portion | Portion | Portion | |||||||||||||
Net investment in leases(a) | 2,217 | 30 | 16,747 | 3,395 | ||||||||||||
Income taxes recoverable | 3,943 | — | 12,847 | — | ||||||||||||
Accrued pension benefit (see note 21) | — | 13,610 | — | 9,911 | ||||||||||||
Prepaid expenses and deposits(b) | 16,006 | 6,755 | 15,236 | 712 | ||||||||||||
Deferred charges(c) | 10,709 | 6,224 | 4,808 | 8,637 | ||||||||||||
Derivative assets(d) | 10,805 | 8,797 | 354 | — | ||||||||||||
Inventories(e) | 4,723 | — | 7,239 | — | ||||||||||||
Other assets(f) | 784 | 6,887 | 546 | 4,713 | ||||||||||||
49,187 | 42,303 | 57,777 | 27,368 | |||||||||||||
(a) | The net investment in leases is classified on the balance sheet in other current assets and other long-term assets, and includes the following: |
December 31, | December 31, | |||||||
Net investment in leases as at | 2008 | 2007 | ||||||
Total minimum lease payments | 2,305 | 21,383 | ||||||
Unearned finance income | (58 | ) | (1,241 | ) | ||||
2,247 | 20,142 | |||||||
Current portion | (2,217 | ) | (16,747 | ) | ||||
Long-term portion | 30 | 3,395 | ||||||
Unearned finance income is allocated to income over the term of the lease in a manner that produces a constant rate of return on the investment in the leases. The investment in the leases for the purposes of income recognition is composed of net minimum lease payments and unearned finance income. Future minimum lease payments receivable under the sales-type leases are $2.3 million in 2009. | ||
(b) | Prepaid expense and deposits includes mainly prepaid insurance for in-orbit satellites, prepaid interest on banker’s acceptances and deposits related to foreign taxes. | |
(c) | Deferred charges include deferred costs related to deferred revenue, as well as deferred financing charges related to the revolving credit facility and the Canadian term loan facility (note 14). | |
(d) | Derivative assets, both short and long-term, comprise the following: |
December 31, | December 31, | |||||||||
Derivative asset | Maturity | 2007 | 2008 | |||||||
Foreign currency forward contracts | February 2, 2009 to December 1, 2009 | 10,805 | 354 | |||||||
Cross currency basis swap | October 31, 2014 | 8,797 | — | |||||||
19,602 | 354 | |||||||||
(e) | Inventories are valued at lower of cost and net realizable value and consist of $3.8 million (2007 — $5.7 million) of finished goods and $0.9 million (2007 — $1.5 million) of work in process. Cost for substantially all network equipment inventories is determined on an average cost basis. Cost for work in process and certain one-of-a-kind finished goods is determined using specific identification. All of the inventories have been pledged as security pursuant to the terms of the credit facilities. | |
(f) | Other assets, both short and long term components, at December 31, 2008 include: tax indemnifications receivable from Loral of $2.9 million (note 22), other deposits of $1.1 million, investments of $0.6 million, long term trade receivables of $1.8 million, and other assets of $1.3 million. The breakdown at December 31, 2007 includes: tax indemnifications receivable from Loral of $2.3 million, other deposits of $2.1 million, investments of $0.6 million, and long term trade receivables of $0.2 million. | |
Investments are recorded at cost. No impairments were recorded as no events or changes in circumstances were identified during the period that may have a significant adverse effect on the carrying value of the investments. Telesat has a portfolio interest in Hellas-Sat Consortium |
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Limited. The consortium has one satellite which provides regional coverage to Greece, Cyprus and the Balkans. Telesat also holds a nominal portfolio interest in Anik-Colombia. Telesat’s wholly-owned subsidiary Infosat holds a 22% interest in Pakistan’s Comstar ISA Ltd., a satellite service provider which is recorded using the equity method. |
11. | Satellites, Property and Other Equipment |
Accumulated | Net Book | |||||||||||
Cost | Amortization | Value | ||||||||||
December 31, 2008 | ||||||||||||
Satellites | 1,544,396 | (177,768 | ) | 1,366,628 | ||||||||
Earth stations | 139,227 | (19,012 | ) | 120,215 | ||||||||
Transponders under capital lease | 34,189 | (4,943 | ) | 29,246 | ||||||||
Office buildings and other | 36,248 | (8,555 | ) | 27,693 | ||||||||
Construction in progress | 339,794 | — | 339,794 | |||||||||
2,093,854 | (210,278 | ) | 1,883,576 | |||||||||
December 31, 2007 | ||||||||||||
Satellites | 1,285,583 | (26,324 | ) | 1,259,259 | ||||||||
Earth stations | 120,210 | (4,546 | ) | 115,664 | ||||||||
Transponders under capital lease | 38,588 | (893 | ) | 37,695 | ||||||||
Office buildings and other | 32,619 | (1,544 | ) | 31,075 | ||||||||
Construction in progress | 346,940 | — | 346,940 | |||||||||
1,823,940 | (33,307 | ) | 1,790,633 | |||||||||
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12. | Goodwill and Intangible Assets |
Accumulated | Net Book | |||||||||||
Cost | Amortization | Value | ||||||||||
2008 | ||||||||||||
Finite life intangible assets: | ||||||||||||
Revenue backlog | 274,487 | (44,988 | ) | 229,499 | ||||||||
Customer relationships | 207,704 | (14,500 | ) | 193,204 | ||||||||
Favourable leases | 4,816 | (1,987 | ) | 2,829 | ||||||||
Concession right | 1,230 | — | 1,230 | |||||||||
Transponder rights | 28,497 | (3,626 | ) | 24,871 | ||||||||
Patents | 59 | (4 | ) | 55 | ||||||||
516,793 | (65,105 | ) | 451,688 | |||||||||
Indefinite life intangible assets: | ||||||||||||
Orbital slots | 113,347 | — | 113,347 | |||||||||
Trade name | 17,000 | — | 17,000 | |||||||||
Total intangible assets | 647,140 | (65,105 | ) | 582,035 | ||||||||
Goodwill | 2,446,603 | — | 2,446,603 | |||||||||
Goodwill and intangible assets | 3,093,743 | (65,105 | ) | 3,028,638 | ||||||||
Accumulated | Net Book | |||||||||||
Cost | Amortization | Value | ||||||||||
2007 | ||||||||||||
Finite life intangible assets: | ||||||||||||
Revenue backlog | 274,487 | (5,316 | ) | 269,171 | ||||||||
Customer relationships | 207,704 | (2,072 | ) | 205,632 | ||||||||
Favourable leases | 4,368 | (218 | ) | 4,150 | ||||||||
Transponder rights | 28,497 | (518 | ) | 27,979 | ||||||||
Patents | 59 | — | 59 | |||||||||
515,115 | (8,124 | ) | 506,991 | |||||||||
Indefinite life intangible assets: | ||||||||||||
Orbital slots | 596,347 | — | 596,347 | |||||||||
Trade name | 17,000 | — | 17,000 | |||||||||
Total intangible assets | 1,128,462 | (8,124 | ) | 1,120,338 | ||||||||
Goodwill | 2,446,603 | — | 2,446,603 | |||||||||
Goodwill and intangible assets | 3,575,065 | (8,124 | ) | 3,566,941 | ||||||||
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13. | Other Liabilities |
December 31, 2008 | December 31, 2007 | |||||||||||||||||||
Current | Long Term | Current | Long Term | |||||||||||||||||
Portion | Portion | Portion | Portion | |||||||||||||||||
Deferred revenues and deposits(a) | 61,960 | 323,608 | 54,652 | 257,256 | ||||||||||||||||
Derivative liabilities(b) | — | 82,255 | 14,811 | 271,061 | ||||||||||||||||
Capital lease liabilities(c) | 15,644 | 24,213 | 29,008 | 44,344 | ||||||||||||||||
Deferred satellites performance incentive payments(d) | 11,425 | 60,895 | 7,533 | 35,791 | ||||||||||||||||
Interest payable | 43,517 | — | 40,146 | — | ||||||||||||||||
Dividends payable on senior preferred shares (see note 15) | — | 11,550 | 1,695 | — | ||||||||||||||||
Pension and other post retirement liabilities (see note 21) | — | 24,957 | — | 24,313 | ||||||||||||||||
Other liabilities(e) | 5,549 | 38,658 | 4,530 | 29,722 | ||||||||||||||||
138,095 | 566,136 | 152,375 | 662,487 | |||||||||||||||||
(a) | Deferred revenues represent the Company’s liability for the provision of future services and are classified on the balance sheet in other current liabilities and other long-term liabilities. The prepaid amount is brought into income over the period of service to which the prepayment applies. The net amount outstanding at December 31, 2008 will be reflected in the statements of loss as follows: $57.5 million in 2009, $34.0 million in 2010, $32.6 million in 2011, $32.6 million in 2012 , $32.2 million in 2013 and $192.2 million thereafter. |
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(b) | Derivative liabilities, both short and long-term, comprise the following: |
December 31, | December 31, | |||||||||
Derivative liability | Maturity | 2008 | 2007 | |||||||
Foreign currency forward contracts | January 1, 2008 to December 1, 2009 | — | 17,545 | |||||||
Cross currency basis swap | October 31, 2014 | — | 261,974 | |||||||
Interest rate swaps | January 31, 2010 to November 28, 2011 | 82,255 | 6,353 | |||||||
82,255 | 285,872 | |||||||||
(c) | The capital lease liabilities are classified on the balance sheet in other current liabilities and other long-term liabilities. |
December 31, | December 31, | |||||||
Capital lease liabilities | 2008 | 2007 | ||||||
Total minimum lease payments | 48,889 | 90,025 | ||||||
Amount representing interest (9)% | (9,032 | ) | (16,673 | ) | ||||
39,857 | 73,352 | |||||||
Current portion | (15,644 | ) | (29,008 | ) | ||||
Long-term portion | 24,213 | 44,344 | ||||||
Future minimum lease payments payable under all capital leases are $18.7 million in 2009, $6.0 million in 2010, $6.1 million in 2011, $6.0 million in 2012, $6.0 million in 2013 and $6.1 million thereafter. | ||
(d) | Deferred satellite performance incentive payments are payable over the lives of the Nimiq 1, Nimiq 4, Anik F1, Anik F2, Anik F3 and Anik F1R satellites. The present value of the payments is capitalized as part of the cost of the satellite, recorded as a liability, and charged against operations as part of the normal amortization of the satellite. The present value of the amounts payable on the successful operation of the transponders are $11.4 million in 2009, $5.2 million in 2010, $4.5 million in 2011, $3.8 million in 2012, $4.0 million in 2013 and $43.4 million thereafter. | |
(e) | Other liabilities at December 31, 2008 include: tax indemnifications payable to Loral (note 22) of $8.5 million (2007 — $6.9 million),potential income tax liabilities of $2.6 million (2007 — $1.8 million), unfavourable leases of $1.9 million (2007 — $2.2 million), unfavourable customer revenue backlog of $12.8 million (2007 — $15.2 million), income taxes payable of $0.8 million (2007 — $0.9 million), promissory note payable to Loral of $7.4 million (note 23), and other liabilities of $10.2 million (2007 — $7.3 million). |
14. | Debt Financing |
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Senior secured credit facilities(a): | ||||||||
Revolving facility | — | 20,000 | ||||||
The Canadian term loan facility | 195,000 | 200,000 | ||||||
The U.S. term loan facility | 2,087,010 | 1,687,652 | ||||||
The U.S. term loan II facility | 179,207 | 5,842 | ||||||
Senior bridge loan(b) | — | 667,806 | ||||||
Senior notes(c) | 818,620 | — | ||||||
Senior subordinated bridge loan(d) | — | 209,324 | ||||||
Senior subordinated notes(e) | 256,400 | — | ||||||
Other debt financing(f) | 258 | 3,739 | ||||||
3,536,495 | 2,794,363 | |||||||
Current portion | (23,272 | ) | (18,419 | ) | ||||
Long-term portion | 3,513,223 | 2,775,944 | ||||||
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(a) | The senior secured credit facilities are secured by substantially all of Telesat’s assets. Under the terms of these facilities, Telesat is required to comply with certain covenants including financial reporting, maintenance of certain financial covenant ratios for leverage and interest coverage, a requirement to maintain minimum levels of satellite insurance, restrictions on capital expenditures, a restriction on fundamental business changes or the creation of subsidiaries, restrictions on investments, restrictions on dividend payments, restrictions on the incurrence of additional debt, restrictions on asset dispositions, and restrictions on transactions with affiliates. The financial covenant ratios include total debt to EBITDA for covenant purposes (earnings before interest, taxes, depreciation, amortization and other charges) and EBITDA for covenant purposes to interest expense. Both financial covenant ratios become tighter over the term of the credit facility. At December 31, 2008 Telesat was in compliance with all of the required covenants. |
(i) | A revolving Canadian dollar denominated credit facility (the “revolving facility”) of up to the Canadian dollar equivalent of $153 million (US$124.9 million) is available to Telesat. This revolving facility matures on October 31, 2012 and is available to be drawn at any time. The drawn loans will bear interest at the prime rate or LIBOR or Bankers’ Acceptance plus an applicable margin of 175 to 275 basis points per annum. Undrawn amounts under the facility are subject to a commitment fee. As at December 31, 2008, no funds were drawn under this facility. |
(ii) | The Canadian term loan facility is a $200 million loan facility denominated in Canadian dollars, bears interest at a floating rate of the Bankers’ Acceptance rate plus an applicable margin of 275 basis points per annum, and has a maturity of October 31, 2012. The required repayments on the Canadian term loan facility were $5 million for the year ended December 31, 2008 and will be $10 million for the year ended December 31, 2009, $15 million for the year ended December 31, 2010, $90 million for the year ended December 31, 2011 and $80 million for the year ended December 31, 2012. The payments will be made quarterly in varying amounts. The average interest rate was 6.57%for the year ended December 31, 2008, and 7.55% for the two months ended December 31, 2007. This facility was fully drawn at December 31, 2008 and principal repayments are being made as required. |
(iii) | The U.S. term loan facility is a $1,755 million loan facility denominated in US dollars ($2,149 million CAD at December 31, 2008), bears interest at LIBOR plus an applicable margin of 300 basis points per annum, and has a maturity of October 31, 2014. The average interest rate was 6.35% for the year ended December 31, 2008, and 7.92% for the two months ended December 31, 2007. This facility was fully drawn at December 31, 2008 and principal repayments are being made as required. |
(iv) | The U.S. term loan II facility is a $150 million delayed draw facility denominated in US dollars ($183.7 million CAD at December 31, 2008), bears interest at LIBOR plus an applicable margin of 300 basis points per annum, and has a maturity of October 31, 2014. The average interest rate was |
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6.17% for the year ended December 31, 2008 and 8.0% for the two months ended December 31, 2007. The U.S. term loan II facility was available to be drawn for 12 months after the closing of the Telesat Canada acquisition to fund capital expenditures. The undrawn amount of the U.S. term loan II was subject to a commitment fee. This facility was fully drawn at December 31, 2008 and principal repayments are being made as required. |
(b) | The Senior bridge loan was a $692.8 million unsecured loan facility denominated in US dollars ($684.6 million CAD at December 31, 2008), guaranteed by certain Telesat subsidiary entities. This facility had a maturity of October 31, 2008 and an initial interest rate per annum equal to the greater of 9% or three-month LIBOR plus the applicable margin. The applicable margin increased over time subject to an interest rate cap of 11%. The average interest rate was 9.0% for the two months ended December 31, 2007 and 9.0% for the January 1, 2008 to June 29, 2008 period. |
(c) | On June 30, 2008, Telesat exchanged the outstanding US$692.8 million Senior bridge loan for US$692.8 million Senior notes. The Senior notes bear interest at an annual rate of 11.0% and are due November 1, 2015. The Senior notes include covenants or terms that restrict Telesat’s ability to, among other things, (i) incur additional indebtedness, (ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) modify or cancel the Company’s satellite insurance, (vi) effect mergers with another entity, and (vii) redeem the Senior notes prior to May 1, 2012, in each case subject to exceptions provided in the Senior notes indenture. |
(d) | The Senior subordinated bridge loan was a $217.2 million unsecured loan facility denominated in US dollars ($214.6 million CAD), guaranteed by certain Telesat subsidiary entities. This facility had a maturity of October 31, 2008 and an initial interest rate per annum equal to the greater of 10.5% or three-month LIBOR plus the applicable margin. The applicable margin increased over time subject to an interest rate cap of 12.5%. The average interest rate was 10.5% for the two months ended December 31, 2007, and 10.5% for the January 1, 2008 to June 29, 2008 period. |
(e) | On June 30, 2008, Telesat also exchanged the outstanding US$217.2 million Senior subordinated bridge loan for US$217.2 million Senior subordinated notes. The Senior subordinated notes bear interest at a rate of 12.5% and are due November 1, 2017. The Senior subordinated notes include covenants or terms that restrict Telesat’s ability to, among other things, (i) incur additional indebtedness, (ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) modify or cancel the Company’s satellite insurance, (vi) effect mergers with another entity, and (vii) redeem the Senior subordinated notes prior to May 1, 2013, in each case subject to exceptions provided in the Senior subordinated notes indenture. |
(f) | Other debt financing includes the financing for the Company’s headquarters building. With respect to the headquarters building, the Company shares equally with the developer, the ownership, cost and debt of the building. The Company has leased the developer’s share for twenty years beginning January 25, 1989 for an annual rent, excluding operating costs, of $1.7 million. Total headquarters financing of $0.2 million includes the amount owing under this capital lease of $0.1 million at December 31, 2008. The imputed interest rate for the capital lease is 10.69% per annum. |
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2009 | 2010 | 2011 | 2012 | 2013 | Thereafter | Total | ||||||
33.6 | 38.3 | 113.3 | 103.3 | 23.3 | 3,308.2 | 3,620.0 |
15. | Senior Preferred Shares |
16. | Capital Stock |
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Common Shares | ||||||||
Number | Value ($) | |||||||
Opening balance, October 31, 2007 | 1 | — | ||||||
Issued for cash (notes 1 and 3) | 35,172,218 | 311,124 | ||||||
Issued in exchange for contributed assets (notes 1 and 3) | 39,080,241 | 445,290 | ||||||
Ending balances, December 31, 2008 and 2007 | 74,252,460 | 756,414 | ||||||
• | The holders of Voting Participating Preferred Shares are not entitled to vote at meetings of the shareholders of the Company on resolutions electing directors. | |
• | For all other meetings of the shareholders of the Company, the holders of Voting Participating Preferred Shares are entitled to a variable number of votes per Voting Participating Preferred Share based on the number of Voting Participating Preferred Shares, Non-Voting Participating Preferred Shares and Redeemable Non-Voting Participating Preferred Shares outstanding on the record date of the given meeting of the shareholders of the Company. | |
• | The Voting Participating Preferred Shares are convertible, at any time, at the holders’ option into Common Shares or Non-Voting Participating Preferred Shares on a one-for-one basis as long as the result of such conversion does not cause the Company to cease to be a “qualified corporation” within the meaning of the Canadian Telecommunication Common Carrier Ownership and Control Regulations pursuant to the Telecommunications Act (Canada). |
• | The holders of Non-Voting Participating Preferred Shares are not entitled to vote on any matter at meetings of the shareholders of the Company, except in respect of a class vote applicable only to the Non-Voting Participating Preferred Shares. | |
• | The Non-Voting Participating Preferred Shares are convertible, at any time, at the holders’ option into Common Shares or Voting Participating Preferred Shares on a one-for-one basis as long as the result of such conversion does not cause the Company to cease to be a “qualified corporation” within the meaning of the Canadian Telecommunication Common Carrier Ownership and Control Regulations pursuant to the Telecommunications Act (Canada). |
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• | The holders of Director Voting Preferred Shares are entitled to receive notice of and to attend all meetings of the shareholders of the Company at which directors of the Company are to be elected. The holders of the Director Voting Preferred Shares are not entitled to attend meetings of the shareholders of the Company and have no right to vote on any matter other than the election of directors of the Company. | |
• | The holders of Director Voting Preferred Shares are entitled to receive annual non-cumulative dividends of $10 per share if declared by the Board of Directors of the Company, in priority to the payment of dividends on the Common Shares, Voting Participating Preferred Shares, Non-Voting Participating Preferred Shares, Redeemable Common Shares, and Redeemable Non-Voting Participating Preferred Shares, but after payment of any accrued dividends on the Senior Preferred Shares. | |
• | In the event of liquidation,wind-up or dissolution, the holders of Director Voting Preferred Shares are entitled to receive $10 per share in priority to the payment of dividends on the Common Shares, Voting Participating Preferred Shares, Non-Voting Participating Preferred Shares, Redeemable Common Shares, and Redeemable Non-Voting Participating Preferred Shares, but after payment of any accrued dividends on the Senior Preferred Shares. | |
• | The Director Voting Preferred Shares are redeemable at the option of the Company, at any time, at a redemption price of $10 per share. |
Non-Voting | ||||||||||||||||||||||||||||||||
Voting Participating | Participating | Director Voting | Total | |||||||||||||||||||||||||||||
Value | Value | Value | Value | |||||||||||||||||||||||||||||
Number | ($) | Number | ($) | Number | ($) | Number | ($) | |||||||||||||||||||||||||
Opening balance, October 31, 2007 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Issued for cash | 7,034,444 | 117,388 | — | — | 1,000 | 10 | 7,035,444 | 117,398 | ||||||||||||||||||||||||
Issued in exchange for contributed assets | — | — | 25,794,025 | 304,449 | — | — | 25,794,025 | 304,449 | ||||||||||||||||||||||||
Issued in exchange for the novation of forward contracts from Loral Skynet | — | — | 10,159,799 | 119,917 | — | — | 10,159,799 | 119,917 | ||||||||||||||||||||||||
Ending balance, December 31, 2008 and 2007 | 7,034,444 | 117,388 | 35,953,824 | 424,366 | 1,000 | 10 | 42,989,268 | 541,764 | ||||||||||||||||||||||||
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17. | Cash Flow Information |
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Cash and cash equivalents is comprised of: | ||||||||
Cash | 26,584 | 32,737 | ||||||
Short term investments, original maturity 90 days or less | 71,955 | 9,466 | ||||||
98,539 | 42,203 | |||||||
Changes in operating assets and liabilities are comprised of: | ||||||||
Receivables | (3,303 | ) | (4,718 | ) | ||||
Other assets | (34,885 | ) | 132,768 | |||||
Accounts payable and accrued liabilities | (12,947 | ) | 72,380 | |||||
Income taxes payable | 960 | (749 | ) | |||||
Other liabilities | 99,034 | 5,809 | ||||||
48,859 | 205,490 | |||||||
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Non-cash investing and financing activities are comprised of: | ||||||||
Purchase of satellites, property and other equipment | 3,595 | 4,767 | ||||||
Purchase of concession right | 1,230 | — | ||||||
Shares issued in exchange for assets contributed (note 3) | — | 869,656 |
18. | Capital Disclosures |
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Shareholders’ equity, excluding accumulated other comprehensive loss | 477,174 | 1,294,127 | ||||||
Debt financing | 3,536,495 | 2,794,363 | ||||||
Cash and cash equivalents | 98,539 | 42,203 |
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19. | Financial Instruments |
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Carrying value | ||||||||||||||||||||
Loans & | ||||||||||||||||||||
HFT | AFS | Receivables | Total | Fair value | ||||||||||||||||
Financial assets | ||||||||||||||||||||
Cash and cash equivalents | 98,539 | — | — | 98,539 | 98,539 | |||||||||||||||
Accounts and notes receivable | — | — | 61,933 | 61,933 | 61,933 | |||||||||||||||
Derivative financial instruments | 19,602 | — | — | 19,602 | 19,602 | |||||||||||||||
Other assets | 14,936 | 637 | 2,202 | 17,775 | 17,775 | |||||||||||||||
133,077 | 637 | 64,135 | 197,849 | 197,849 | ||||||||||||||||
Carrying value | ||||||||||||||||
HFT | Other | Total | Fair value | |||||||||||||
Financial liabilities | ||||||||||||||||
Accounts payable and accrued liabilities | — | 48,764 | 48,764 | 48,764 | ||||||||||||
Debt | — | 3,536,237 | 3,536,237 | 2,371,014 | ||||||||||||
Derivative financial instruments | 82,255 | — | 82,255 | 82,255 | ||||||||||||
Other liabilities | — | 288,236 | 288,236 | 191,837 | ||||||||||||
82,255 | 3,873,237 | 3,955,492 | 2,693,870 | |||||||||||||
Carrying value | ||||||||||||||||||||
Loans & | ||||||||||||||||||||
HFT | AFS | Receivables | Total | Fair value | ||||||||||||||||
Financial assets | ||||||||||||||||||||
Cash and cash equivalents | 42,203 | — | — | 42,203 | 42,203 | |||||||||||||||
Accounts and notes receivable | — | — | 55,299 | 55,299 | 55,299 | |||||||||||||||
Derivative financial instruments | 354 | — | — | 354 | 354 | |||||||||||||||
Other assets | 7,203 | — | — | 7,203 | 7,203 | |||||||||||||||
49,760 | — | 55,299 | 105,059 | 105,059 | ||||||||||||||||
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Carrying value | ||||||||||||||||
HFT | Other | Total | Fair value | |||||||||||||
Financial liabilities | ||||||||||||||||
Accounts payable and accrued liabilities | — | 81,221 | 81,221 | 81,221 | ||||||||||||
Debt | — | 2,792,575 | 2,792,575 | 2,865,116 | ||||||||||||
Derivative financial instruments | 285,872 | — | 285,872 | 285,872 | ||||||||||||
Other liabilities | — | 228,654 | 228,654 | 230,258 | ||||||||||||
285,872 | 3,102,450 | 3,388,322 | 3,462,467 | |||||||||||||
Allowance for Doubtful Accounts | 2008 | 2007 | ||||||
Balance at January 1 and October 31, respectively | 4.3 | 4.2 | ||||||
Provision for receivables impairment | 1.6 | 0.2 | ||||||
Receivables written off during the period as uncollectible | (0.5 | ) | (0.1 | ) | ||||
Balance at December 31 | 5.4 | 4.3 | ||||||
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Carrying | Contractual | |||||||||||||||||||||||||||||||
In Millions of Canadian Dollars | Amount | Cash Flows | 2009 | 2010 | 2011 | 2012 | 2013 | After 2012 | ||||||||||||||||||||||||
Accounts payable and accrued liabilities | 48.8 | 48.8 | 48.8 | — | — | — | — | — | ||||||||||||||||||||||||
Customer and other deposits | 10.7 | 10.7 | 8.6 | 2.1 | — | — | — | — | ||||||||||||||||||||||||
Other liabilities | 136.6 | 136.6 | 59.6 | 21.3 | 4.5 | 3.8 | 4.0 | 43.4 | ||||||||||||||||||||||||
Derivative financial instruments | 82.3 | 82.3 | — | 18.5 | 63.8 | — | — | — | ||||||||||||||||||||||||
Long term debt | 3,536.2 | 3,620.0 | 33.6 | 38.3 | 113.3 | 103.3 | 23.3 | 3,308.2 | ||||||||||||||||||||||||
3,814.6 | 3,898.4 | 150.6 | 80.2 | 181.6 | 107.1 | 27.3 | 3,351.6 | |||||||||||||||||||||||||
20. | Stock-Based Compensation Plans |
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December 31, 2008 | December 31, 2007 | |||||||||||||||||||
Weighted- | Weighted- | |||||||||||||||||||
Average | Average | |||||||||||||||||||
Number | Exercise | Number | Exercise | |||||||||||||||||
of Shares | Price ($) | of Shares | Price ($) | |||||||||||||||||
Outstanding, beginning of period | 406,908 | 34 | 411,047 | 34 | ||||||||||||||||
Granted | — | — | — | — | ||||||||||||||||
Exercised | (264,853 | ) | 30 | — | — | |||||||||||||||
Expired/forfeited | (142,055 | ) | 41 | (4,139 | ) | 30 | ||||||||||||||
Outstanding, end of period | — | — | 406,908 | 34 | ||||||||||||||||
Exercisable, end of period | — | — | 406,908 | 34 | ||||||||||||||||
Options outstanding | Options Exercisable | |||||||||||||||||||
Weighted- | Weighted- | Weighted- | ||||||||||||||||||
Average | Average | Average | ||||||||||||||||||
Remaining | Exercise | Exercise | ||||||||||||||||||
Range of Exercise Price | Number | Life | Price ($) | Number | Price ($) | |||||||||||||||
Below $20 | 375 | 0.33 | 15.15 | 375 | 15.15 | |||||||||||||||
$20 to $29 | 101,972 | 0.33 | 29.42 | 101,972 | 29.42 | |||||||||||||||
$30 to $39 | 162,506 | 0.33 | 30.79 | 162,506 | 30.79 | |||||||||||||||
$40 and over | 142,055 | 1.22 | 40.95 | 142,055 | 40.95 | |||||||||||||||
406,908 | 0.64 | 33.98 | 406,908 | 33.98 | ||||||||||||||||
October 30, | December 31, | |||||||
2007 | 2006 | |||||||
Compensation cost | 617 | 170 | ||||||
Number of stock options granted | 159,506 | 101,972 | ||||||
Weighted-average fair value per option granted($) | 3.4 | 2.3 | ||||||
Assumptions: | ||||||||
Dividend yield | 4.5 | % | 4.4 | % | ||||
Expected volatility | 20 | % | 17 | % | ||||
Risk-free interest rate | 4.0 | % | 4.0 | % | ||||
Expected life (years) | 3.5 | 3.5 |
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Number of RSUs | ||||||||
October 30, | December 31, | |||||||
2007 | 2006 | |||||||
Outstanding, beginning of period | 136,523 | 76,237 | ||||||
Granted | — | 136,523 | ||||||
Dividends credited | 5,460 | 883 | ||||||
Payments | (141,983 | ) | (77,120 | ) | ||||
Expired/forfeited | — | — | ||||||
Outstanding, end of period | — | 136,523 | ||||||
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December 31, | December 31, | October 30, | December 31, | |||||||||||||
2008 | 2007 | 2007 | 2006 | |||||||||||||
Outstanding, beginning of period | 6,772 | 6,772 | 6,512 | 4,399 | ||||||||||||
Granted | — | — | — | 1,846 | ||||||||||||
Dividends credited | 65 | — | 260 | 267 | ||||||||||||
Exercised | (6,837 | ) | — | — | — | |||||||||||
Outstanding, end of period | — | 6,772 | 6,772 | 6,512 | ||||||||||||
Options Outstanding | Options Exercisable | |||||||||||
Weighted-Average | ||||||||||||
At December 31, 2008 | Number | Remaining Life | Number | |||||||||
Exercise price $11.07 | 7,740,476 | 9 years | 1,538,623 |
December 31, | ||||
2008 | ||||
Compensation cost (credited to contributed surplus) | 5,448 | |||
Number of stock options granted | 7,740,476 | |||
Weighted-average fair value per option granted($) | 8.52 | |||
Assumptions: | ||||
Dividend yield | — | % | ||
Expected volatility | 31.5 | % | ||
Risk-free interest rate | 3.78 | % | ||
Expected life (years) | 10 |
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21. | Employee Benefit Plans |
December 31, 2008 | ||||||||||||||||||||
Telesat Canada | Skynet | |||||||||||||||||||
Pension and other benefits | Pension | Other | Other | Total | ||||||||||||||||
Change in benefit obligations | ||||||||||||||||||||
Benefit obligation, January 1, 2008 | 163,546 | 16,224 | 8,089 | 187,859 | ||||||||||||||||
Current service cost | 3,926 | 433 | — | 4,359 | ||||||||||||||||
Interest cost | 9,271 | 862 | 883 | 11,016 | ||||||||||||||||
Actuarial (gains) losses | (40,426 | ) | (4,396 | ) | (129 | ) | (44,951 | ) | ||||||||||||
Benefit payments | (10,884 | ) | (596 | ) | (155 | ) | (11,635 | ) | ||||||||||||
Employee contributions | 1,321 | — | 37 | 1,358 | ||||||||||||||||
Benefit obligation, December 31, 2008 | 126,754 | 12,527 | 8,725 | 148,006 | ||||||||||||||||
December 31, 2008 | ||||||||||||||||||||
Telesat Canada | Skynet | |||||||||||||||||||
Pension and other benefits | Pension | Other | Other | Total | ||||||||||||||||
Change in fair value of plan assets | ||||||||||||||||||||
Fair value of plan assets, January 1, 2008 | 173,457 | — | — | 173,457 | ||||||||||||||||
Return on plan assets | (29,811 | ) | — | — | (29,811 | ) | ||||||||||||||
Benefit payments | (10,884 | ) | (596 | ) | (155 | ) | (11,635 | ) | ||||||||||||
Employee contributions | 1,321 | — | 37 | 1,358 | ||||||||||||||||
Employer contributions | 4,210 | 596 | 118 | 4,924 | ||||||||||||||||
Fair value of plan assets, December 31, 2008 | 138,293 | — | — | 138,293 | ||||||||||||||||
Funded status | ||||||||||||||||||||
Plan surplus (deficit) | 11,539 | (12,527 | ) | (8,725 | ) | (9,713 | ) | |||||||||||||
Unamortized net actuarial (gain) loss | 2,071 | (3,705 | ) | — | (1,634 | ) | ||||||||||||||
Accrued benefit asset (liability) | 13,610 | (16,232 | ) | (8,725 | ) | (11,347 | ) | |||||||||||||
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December 31, 2007 | ||||||||||||||||||||||||
Telesat Canada | Skynet | |||||||||||||||||||||||
Pension and other benefits | Pension | Other | Other | Total | ||||||||||||||||||||
Change in benefit obligations | ||||||||||||||||||||||||
Benefit obligation, October 31, 2007 | 159,392 | 16,631 | 8,079 | 184,102 | ||||||||||||||||||||
Current service cost | 774 | 79 | — | 853 | ||||||||||||||||||||
Interest cost | 1,513 | 146 | — | 1,659 | ||||||||||||||||||||
Benefit payments | (722 | ) | (70 | ) | (24 | ) | (816 | ) | ||||||||||||||||
Plan amendment (early retirement program) | 5,703 | — | 5 | 5,708 | ||||||||||||||||||||
Employee contributions | 145 | — | 87 | 232 | ||||||||||||||||||||
Restructuring | (3,259 | ) | (562 | ) | (58 | ) | (3,879 | ) | ||||||||||||||||
Benefit obligation, December 31, 2007 | 163,546 | 16,224 | 8,089 | 187,859 | ||||||||||||||||||||
December 31, 2007 | ||||||||||||||||
Telesat Canada | Skynet | |||||||||||||||
Pension and other benefits | Pension | Other | Other | Total | ||||||||||||
Change in fair value of plan assets | ||||||||||||||||
Fair value of plan assets, October 31, 2007 | 176,595 | — | — | 176,595 | ||||||||||||
Return on plan assets | (2,596 | ) | — | — | (2,596 | ) | ||||||||||
Benefit payments | (722 | ) | (70 | ) | (24 | ) | (816 | ) | ||||||||
Employee contributions | 145 | — | 5 | 150 | ||||||||||||
Employer contributions | 35 | 70 | 19 | 124 | ||||||||||||
Fair value of plan assets, December 31, 2007 | 173,457 | — | — | 173,457 | ||||||||||||
Funded (deficiency) status | 9,911 | (16,224 | ) | (8,089 | ) | (14,402 | ) | |||||||||
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Equity securities | 59 | % | 60 | % | ||||
Fixed income instruments | 39 | % | 38 | % | ||||
Short-term investments | 2 | % | 2 | % | ||||
Total | 100 | % | 100 | % | ||||
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December 31, 2008 | December 31, 2007 | |||||||||||||||||||||||
Telesat Canada | Skynet | Telesat Canada | Skynet | |||||||||||||||||||||
Pension | Other | Other | Pension | Other | Other | |||||||||||||||||||
Accrued benefit obligation | ||||||||||||||||||||||||
Discount rate | 7.5 | % | 7.5 | % | 6.5 | % | 5.5 | % | 5.5 | % | 6.5 | % | ||||||||||||
Rate of compensation increase | 3.5 | % | 3.5 | % | 4.3 | % | 3.5 | % | 3.5 | % | 4.3 | % | ||||||||||||
Benefit costs for the periods ended Discount rate | 5.5 | % | 5.5 | % | 6.5 | % | 5.5 | % | 5.5 | % | 6.5 | % | ||||||||||||
Expected long-term rate of return on plan assets | 7.5 | % | — | — | 7.5 | % | — | — | ||||||||||||||||
Rate of compensation increase | 3.5 | % | 3.5 | % | 4.3 | % | 3.5 | % | 3.5 | % | 4.3 | % |
Successor Entity | ||||||||||||||||||||||||||||||||
For the Period October 31 to | ||||||||||||||||||||||||||||||||
Year Ended December 31, 2008 | December 31, 2007 | |||||||||||||||||||||||||||||||
Telesat Canada | Skynet | Telesat Canada | Skynet | |||||||||||||||||||||||||||||
Pension | Other | Other | Total | Pension | Other | Other | Total | |||||||||||||||||||||||||
Current service cost | 3,926 | 433 | — | 4,359 | 774 | 79 | — | 853 | ||||||||||||||||||||||||
Interest cost | 9,271 | 862 | 883 | 11,016 | 1,513 | 146 | — | 1,659 | ||||||||||||||||||||||||
Expected return on plan assets | (12,686 | ) | — | — | (12,686 | ) | (2,206 | ) | — | — | (2,206 | ) | ||||||||||||||||||||
Net benefit expense | 511 | 1,295 | 883 | 2,689 | 81 | 225 | — | 306 | ||||||||||||||||||||||||
Predecessor Entity | ||||||||||||||||||||||||
For the Period January 1 to | ||||||||||||||||||||||||
October 30, 2007 | Year Ended December 31, 2006 | |||||||||||||||||||||||
Pension | Other | Total | Pension | Other | Total | |||||||||||||||||||
Current service cost | 3,612 | 396 | 4,008 | 4,315 | 465 | 4,780 | ||||||||||||||||||
Interest cost | 7,149 | 681 | 7,830 | 8,212 | 767 | 8,979 | ||||||||||||||||||
Expected return on plan assets | (10,610 | ) | — | (10,610 | ) | (11,271 | ) | — | (11,271 | ) | ||||||||||||||
Amortization of past service cost | — | — | — | 900 | — | 900 | ||||||||||||||||||
Amortization of net actuarial loss | 34 | — | 34 | 1,780 | — | 1,780 | ||||||||||||||||||
Amortization of transitional (asset) obligation | (1,288 | ) | 515 | (773 | ) | (1,273 | ) | 618 | (655 | ) | ||||||||||||||
Additional expense | 169 | — | 169 | — | — | — | ||||||||||||||||||
Net benefit expense (income) | (934 | ) | 1,592 | 658 | 2,663 | 1,850 | 4,513 | |||||||||||||||||
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Aggregate of | ||||||||
service and | ||||||||
Benefit Obligation | interest cost | |||||||
As reported | 21,252 | 2,178 | ||||||
Impact of increase of 1% point | 1,817 | 198 | ||||||
Impact of decrease of 1% point | (1,587 | ) | (166 | ) |
22. | Commitments and Contingent Liabilities |
2009 | 2010 | 2011 | 2012 | 2013 | Thereafter | Total | ||||||||||||||||||||||
Off balance sheet commitments | $ | 218,313 | $ | 36,513 | $ | 20,949 | $ | 15,002 | $ | 12,672 | $ | 40,584 | $ | 344,033 |
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23. | Related Party Transactions |
Successor Entity | Predecessor Entity | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
October 31 | January 1 | ||||||||||||||||
Year Ended | to | to | Year Ended | ||||||||||||||
December 31, | December 31, | October 30, | December 31, | ||||||||||||||
2008 | 2007 | 2007 | 2006 | ||||||||||||||
Service revenues | 3,560 | 440 | 139,706 | 139,335 | |||||||||||||
Operations and administration expenses | 6,295 | 825 | 5,340 | 7,340 | |||||||||||||
Capital expenditures — satellites | 83,203 | 12,318 | — | — |
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Receivables at end of period | 3,200 | 3,389 | ||||||
Payables at end of period | 13,770 | 9,682 | ||||||
Note and interest payable at end of period | 7,380 | — |
24. | Comparative Figures |
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25. | Reconciliation of Canadian GAAP to United States GAAP |
Successor Entity | Predecessor Entity | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
October 31 | January 1 | ||||||||||||||||
Year Ended | to | to | Year Ended | ||||||||||||||
December 31, | December 31, | October 30, | December 31, | ||||||||||||||
2008 | 2007 | 2007 | 2006 | ||||||||||||||
Canadian GAAP — Net (loss) earnings | (822,401 | ) | (4,051 | ) | 81,742 | 103,985 | |||||||||||
Gains (losses) on embedded derivatives(a) | 20,118 | 774 | (5,051 | ) | (998 | ) | |||||||||||
Losses on derivatives designated as cash flow hedges under Canadian GAAP(a) | — | — | (10,361 | ) | — | ||||||||||||
Sales type lease — operating lease for U.S. GAAP(b) | 18,808 | 2,748 | (23,617 | ) | — | ||||||||||||
Capital lease — operating lease for U.S. GAAP(b) | (7,584 | ) | (78 | ) | 9,436 | — | |||||||||||
Lease amendments(c) | (1,233 | ) | — | — | — | ||||||||||||
Dividends on senior preferred shares(d) | 9,855 | 1,695 | — | — | |||||||||||||
Tax effect of above adjustments(e) | (8,761 | ) | 275 | 9,606 | 1,568 | ||||||||||||
Uncertainty in income taxes(f) | (6,875 | ) | (2,648 | ) | 3,234 | — | |||||||||||
U.S. GAAP — Net (loss) earnings | (798,073 | ) | (1,285 | ) | 64,989 | 104,555 | |||||||||||
Dividends on preferred shares | — | — | — | (1,487 | ) | ||||||||||||
Other comprehensive (loss) earnings items: | |||||||||||||||||
Change in currency translation adjustment | (7,143 | ) | (599 | ) | 1,715 | (448 | ) | ||||||||||
Loss on derivatives designated as cash flow hedges(a) | — | — | (7,168 | ) | — | ||||||||||||
Net actuarial plans cost(g) | |||||||||||||||||
Net actuarial losses | (1,169 | ) | — | (314 | ) | — | |||||||||||
Net transitional assets | — | — | (525 | ) | — | ||||||||||||
U.S. GAAP — Comprehensive (loss) earnings | (806,385 | ) | (1,884 | ) | 58,697 | 102,620 | |||||||||||
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Successor Entity | Predecessor Entity | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
October 31 | January 1 | ||||||||||||||||
Year Ended | to | to | Year Ended | ||||||||||||||
December 31, | December 31, | October 30, | December 31, | ||||||||||||||
2008 | 2007 | 2007 | 2006 | ||||||||||||||
Cumulative translation adjustment, net of tax | (7,742 | ) | (599 | ) | (568 | ) | (2,283 | ) | |||||||||
Loss on derivatives designated as cash flow hedges(a) | — | — | (7,168 | ) | — | ||||||||||||
Net benefit plans cost(g) | |||||||||||||||||
Net actuarial losses | (1,169 | ) | — | (7,448 | ) | (7,080 | ) | ||||||||||
Net transitional assets | — | — | 3,980 | 4,471 | |||||||||||||
Accumulated other comprehensive loss | (8,911 | ) | (599 | ) | (11,204 | ) | (4,892 | ) | |||||||||
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Canadian GAAP | 469,432 | 1,293,528 | ||||||
Adjustments | ||||||||
Gains on embedded derivatives(a) | 20,892 | 774 | ||||||
Net actuarial losses(g) | (1,169 | ) | — | |||||
Sales type lease — operating lease for U.S. GAAP(b) | 21,556 | 2,748 | ||||||
Capital lease — operating lease for U.S. GAAP(b) | (7,662 | ) | (78 | ) | ||||
Lease amendment(c) | (1,233 | ) | — | |||||
Tax effect of above adjustments(e) | (8,486 | ) | 275 | |||||
Uncertainty in income taxes(f) | (9,523 | ) | (2,648 | ) | ||||
U.S. GAAP | 483,807 | 1,294,599 | ||||||
(a) | Derivatives and embedded derivatives |
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(f) | Uncertainty in income taxes |
(g) | Net benefit plans cost |
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2008 | 2007 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 3,547 | $ | 1,810 | ||||
Accounts receivable — net | 4,963 | 6,624 | ||||||
Other current assets | 597 | 465 | ||||||
Total current assets | 9,107 | 8,899 | ||||||
PROPERTY, PLANT AND EQUIPMENT — NET | 105,922 | 115,538 | ||||||
OTHER ASSETS — NET | 408 | 461 | ||||||
TOTAL | $ | 115,437 | $ | 124,898 | ||||
�� | ||||||||
LIABILITIES AND MEMBERS’ EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 162 | $ | 177 | ||||
Accrued liabilities | 8,584 | 2,191 | ||||||
Payable to related parties | 39,854 | 27,286 | ||||||
Total current liabilities | 48,600 | 29,654 | ||||||
Term loan-related party | 14,744 | 13,632 | ||||||
Other long term liabilities | 16,042 | 21,154 | ||||||
Total liabilities | 79,386 | 64,440 | ||||||
Members’ Equity: | ||||||||
Loral Skynet Corporation | 17,905 | 33,919 | ||||||
Hisdesat | 18,146 | 26,539 | ||||||
Total members’ equity | 36,051 | 60,458 | ||||||
TOTAL | $ | 115,437 | $ | 124,898 | ||||
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CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006
(In thousands)
2008 | 2007 | 2006 | ||||||||||
REVENUES: | ||||||||||||
Revenues from satellite services | $ | 13,226 | $ | 12,999 | $ | 8,416 | ||||||
Related party revenues from satellite services | 7,179 | 6,340 | 6,918 | |||||||||
Total revenues | 20,405 | 19,339 | 15,334 | |||||||||
COST OF SATELLITE SERVICES | 39,963 | 29,689 | 20,735 | |||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 4,193 | 4,072 | 3,232 | |||||||||
OPERATING LOSS | (23,751 | ) | (14,422 | ) | (8,633 | ) | ||||||
INTEREST AND INVESTMENT INCOME | 125 | 182 | 150 | |||||||||
INTEREST EXPENSE | 4,495 | 3,308 | 3,496 | |||||||||
OTHER INCOME (EXPENSE) — Net | 157 | (313 | ) | (134 | ) | |||||||
LOSS BEFORE TAXES | (27,964 | ) | (17,861 | ) | (12,113 | ) | ||||||
INCOME TAX PROVISION | 633 | 560 | 516 | |||||||||
NET LOSS | $ | (28,597 | ) | $ | (18,421 | ) | $ | (12,629 | ) | |||
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CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006
(In thousands)
Hisdesat | ||||||||||||||||
Loral | Loral | Servicios | ||||||||||||||
Skynet | Skynet | Estrategicos, | ||||||||||||||
International LLC | Corporation | S.A. | Total | |||||||||||||
BALANCE — January 1, 2006 | $ | 51,307 | $ | — | $ | 40,201 | $ | 91,508 | ||||||||
Net loss | (7,072 | ) | (5,557 | ) | (12,629 | ) | ||||||||||
BALANCE — December 31, 2006 | 44,235 | — | 34,644 | 78,879 | ||||||||||||
Net loss — January 1, 2007 to October 31, 2007 | (7,577 | ) | (5,954 | ) | (13,531 | ) | ||||||||||
(Sale) purchase of membership interests | (36,658 | ) | 36,658 | — | ||||||||||||
Net loss — November 1, 2007 to December 31, 2007 | (2,739 | ) | (2,151 | ) | (4,890 | ) | ||||||||||
BALANCE — December 31, 2007 | — | 33,919 | 26,539 | 60,458 | ||||||||||||
Interest payable converted to equity | 4,190 | 4,190 | ||||||||||||||
Net loss | (16,014 | ) | (12,583 | ) | (28,597 | ) | ||||||||||
BALANCE — December 31, 2008 | $ | $ | 17,905 | $ | 18,146 | $ | 36,051 | |||||||||
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CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006
(In thousands)
2008 | 2007 | 2006 | ||||||||||
OPERATING ACTIVITIES: | ||||||||||||
Net loss | $ | (28,597 | ) | $ | (18,421 | ) | $ | (12,629 | ) | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 9,651 | 9,747 | 9,693 | |||||||||
Non cash interest expense | 3,893 | 2,464 | 1,950 | |||||||||
Other — accretion to launch consideration payable to Arianespace | 630 | 695 | 1,525 | |||||||||
Adjustment to revenue straight lining assessment | 18 | (25 | ) | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable and other current assets | 1,529 | (3,779 | ) | (1,646 | ) | |||||||
Accounts payable and other accrued liabilities | (78 | ) | (2,826 | ) | 625 | |||||||
Deferred revenue | (2,191 | ) | ||||||||||
Long term liabilities | 2,258 | 1,511 | 605 | |||||||||
Payable to related parties | 13,977 | 12,695 | 8,432 | |||||||||
Net cash provided by operating activities | 3,281 | 2,061 | 6,364 | |||||||||
INVESTING ACTIVITIES — Capital expenditures | (2 | ) | ||||||||||
FINANCING ACTIVITIES: | ||||||||||||
Arianespace Incentive Cap (Note 10) repayments | (1,544 | ) | ||||||||||
Notes payable repayments | (3,340 | ) | (8,960 | ) | ||||||||
Net cash used in financing activities | (1,544 | ) | (3,340 | ) | (8,960 | ) | ||||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | 1,737 | (1,281 | ) | (2,596 | ) | |||||||
CASH AND CASH EQUIVALENTS — Beginning of year | 1,810 | 3,091 | 5,687 | |||||||||
CASH AND CASH EQUIVALENTS — End of year | $ | 3,547 | $ | 1,810 | $ | 3,091 | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2008 AND 2007, AND FOR THE YEARS ENDED
DECEMBER 31, 2008, 2007, AND 2006
(Dollar amounts in thousands, unless otherwise noted)
1. | Organization and Principal Business |
2. | Basis of Presentation |
3. | Summary of Significant Accounting Policies |
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Years | ||
Satellite-in-orbit | 15 | |
Earthstations | 7-15 | |
Equipment, furniture and fixtures | 3 | |
Leasehold improvement on Spainsat Transponders | 15 |
• | Changes in estimates of the useful life of the satellite | |
• | Changes in estimates of our ability to operate the satellite at expected levels | |
• | Changes in the manner in which the satellite is to be used | |
• | The loss of one or several significant customer contracts on the satellite |
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2008 | 2007 | 2006 | ||||||||||
Supplemental information: | ||||||||||||
Capital expenditure incurred and unpaid — related parties | $ | — | $ | — | $ | 2 | ||||||
Interest payable converted to equity | $ | 4,190 | $ | — | $ | — | ||||||
Interest paid | $ | — | $ | 2,546 | $ | — | ||||||
Foreign taxes paid — net of refunds | $ | 533 | $ | 524 | $ | 522 | ||||||
4. | New Accounting Pronouncements |
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5. | Property, Plant and Equipment |
2008 | 2007 | |||||||
Satellite in-orbit | $ | 130,436 | $ | 130,436 | ||||
Earth stations | 9,177 | 9,177 | ||||||
Equipment, furniture and fixtures | 387 | 387 | ||||||
Leasehold improvement on transponders | 2,100 | 2,100 | ||||||
142,100 | 142,100 | |||||||
Accumulated depreciation and amortization | (36,178 | ) | (26,562 | ) | ||||
Property, plant and equipment — net | $ | 105,922 | $ | 115,538 | ||||
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December 31 | ||||
2009 | $ | 8,303 | ||
2010 | 1,216 | |||
2011 | 1,199 |
6. | Other Assets |
2008 | 2007 | |||||||
Intangible assets: | ||||||||
Regulatory and orbital slot | $ | 518 | $ | 518 | ||||
Accumulated amortization | (130 | ) | (95 | ) | ||||
Intangible assets — net | 388 | 423 | ||||||
Other assets | 20 | 38 | ||||||
Total other assets | $ | 408 | $ | 461 | ||||
Years Ending December 31 | ||||
2009 | $ | 35 | ||
2010 | 35 | |||
2011 | 35 | |||
2012 | 35 | |||
2013 | 35 | |||
Thereafter | 213 | |||
Total | $ | 388 | ||
7. | Income Taxes |
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8. | Related Party Transactions |
2008 | 2007 | |||||||
Lease obligation To Hisdesat | $ | 32,308 | $ | 17,348 | ||||
Operations Services Agreements With Hisdesat | 2,093 | 3,454 | ||||||
Hisdesat Management Agreement With XTAR | 1,153 | 1,175 | ||||||
Loral Skynet/Telesat Canada/Space Systems Loral Services Agreement | 2,972 | 3,646 | ||||||
Loral SpaceCom Corporation Management Agreement With XTAR | 1,296 | 1,632 | ||||||
Other | 32 | 31 | ||||||
Total | $ | 39,854 | $ | 27,286 | ||||
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Years Ending December 31 | ||||
2009 | $ | 23,420 | ||
2010 | 23,794 | |||
2011 | 24,175 | |||
2012 | 24,562 | |||
2013 | 24,955 | |||
Thereafter | 195,114 | |||
Total | $ | 316,020 | ||
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9. | Term Loan |
2008 | 2007 | |||||||
Principal amount | $ | 10,787 | $ | 10,787 | ||||
Interest accrued | 3,957 | 2,845 | ||||||
Total | $ | 14,744 | $ | 13,632 | ||||
10. | Other Long Term Liabilities |
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2008 | 2007 | |||||||
Long term liabilities: | ||||||||
Straight lining of Spainsat lease | $ | 4,373 | $ | 2,116 | ||||
Arianespace Incentive Cap | 19,669 | 20,582 | ||||||
Less current portion of Arianespace Incentive Cap | (8,000 | ) | (1,544 | ) | ||||
Total long term liabilities | $ | 16,042 | $ | 21,154 | ||||
11. | Revenue Information |
2008 | 2007 | 2006 | ||||||||||
United States | $ | 13,226 | $ | 12,999 | $ | 8,416 | ||||||
Spain | 7,179 | 6,340 | 6,918 | |||||||||
$ | 20,405 | $ | 19,339 | $ | 15,334 | |||||||
12. | Subsequent Event |
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